Much like the previous day, the major indices spent most of the day oscillating in a relatively narrow, sideways range. This time, however, a positive opening gap enabled stocks to finish moderately higher across the board. The S&P 500 Index gained 0.7%, the Dow Jones Industrial Average 0.5%, and the Nasdaq Composite 0.4%. The small-cap Russell 2000 and S&P Midcap 400 indices rose 0.8% and 0.6% respectively. All the main stock market indexes closed around the upper quarter of their intraday ranges.

Despite the upcoming Fed meeting, the pace of trading increased slightly. Total volume in the NYSE was 6% greater than the previous day's level, while volume in the Nasdaq edged 1% higher. Market internals in the NYSE were more solid than that of the Nasdaq, which was weighed down by weakness in the Biotech sector. Advancing volume in the NYSE exceeded declining volume by a margin of 3 to 1. The Nasdaq adv/dec volume ratio was positive by less than 3 to 2. This was notable because the Nasdaq has generally been showing a significant amount of relative strength to the S&P and Dow.

In our September 18 commentary, we illustrated how the S&P 500 had run into key resistance of its 20-month simple moving average, a level that has perfectly acted as support and resistance in recent years. In case you missed it, below is a recap of the same chart we analyzed that day:



Fast forwarding four trading days later, the S&P had basically held in a tight, sideways range, right at that pivotal resistance level. The bullish, short-term consolidation of the S&P 500 is shown on the hourly chart below:



With the S&P 500 acting bullish by successfully "undercutting" and holding support of its 20-period exponential moving average on the hourly chart (the beige line on the chart above), odds generally favor a breakout above the high of the past week's range. But with the 20-month moving average hovering near the current price of the S&P 500, any short-term breakout attempt may feel the pressure of a market that's testing a momentous area of price resistance. Remember, the longer the time frame of technical analysis, the more substantial the weight of the support or resistance levels. This means a level of resistance on a monthly chart will have more bearing on price than a level of support on an hourly, daily, or even weekly chart. While the S&P 500 could easily bust through its 20-month moving average, we'd be surprised if it did so without first pausing for a substantial pullback, or at least multi-week consolidation. Therefore, use caution when trading any new breakout buy entries right now.

Today, at 2:15 pm ET, the Federal Open Market Committee (FOMC) will announce their latest stance on interest rates and economic policy. A vast majority of economists expect the Fed to leave rates untouched, while also avoiding any verbage on policy that could spook the market. Still, as always, we expect rather volatile and whippy trading action immediately following the afternoon announcement. If the Fed throws any surprises, the typically volatile, post-Fed price action could, of course, turn rather violent. As is standard protocol ahead of any FOMC meeting, we plan to stay on the sidelines today.

Open ETF positions:

Long - DGP, GDX, DBB
Short - (none)

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.