On August 5, Standard and Poor’s made this announcement United States of America Long-Term Rating Lowered To ‘AA+’ Due To Political Risks, Rising Debt Burden; Outlook Negative

The market wasn’t surprised by the announcement, it was rumored for at least a week before the actual announcement came. In fact, the real sell off began with a gap lower on July 27 (circled area on daily chart). Today, the market closed that gap after an uninterrupted rally of ~10% from the last significant pullback low.

Is this area going to be the elusive resistance that shorts have been looking for? It has the potential to be resistance and the short term action is indicating buyers may have run out of energy, but the trends are still higher. Picking a turning point (bottom or top) is one of the most difficult tasks for traders. If attempting to pick a top it is best to start it as a daytrade and then if the market agrees with your position, leave some on and give it more time.

click the $SPY chart to expand