Time to check in with our density theory again.? Today was significant because the S&P 500 reached the top of the value range it has been trading in for a while, pierced it and then faded back down.? So what does the density concept tell us is the most likely event?? Probably a return to the middle of the bell curve that prices have painted recently.? This is around 1256.? The most popular price recently however is more around 1270 and could provide early support or a launching pad if the bulls can win.

What today has done is bring us to an inflection point.? Price has already made many moves back and forth across the face of the bell curve so it may be getting exhausted and need a breakout to new value.? It seems likely that the market will wait for Bernanke first though.? My personal feeling (not worth much) is that a raise is more likely than people think and, even if it isn’t, the pause concept is probably already priced in.? That would lend some credit to the idea that it might return to “center ice” to await the announcement.? I would venture to guess that uncertainty leads to a retreat to old value while certainty leads to a move to new value.? So I’d assign a good probability right now to a move down to 1256 or so.? If it is to do that by the time of the Fed announcement though it would require a pretty quick drop.? That’s why 1270 may be a better catch-all goal and would be perfectly reachable by the FOMC meeting.? Either way, down is the word because old value is currently below the market.

If price does break up to new value, that is probably going to be around 1306.? A break of today’s high would be a pretty bold statement and should mean the bell is finally broken or at least expanding upwards.

Now we can only wait and see…