- S&P 500 Index had a positive session again on Wednesday.
- We continue to see quite a bit of noise in the market.
- The recovery is quite impressive, but we still have a long way to go before you can start talking about a trend change.
Because of this, you need to take the attitude that you are waiting for a setup that goes with the longer-term trend. The 3900 level above could be resistance, right along with the 50-day EMA that sits at the 4000 level.
4000 Level is the Ceiling
The 4000 level is the “ceiling” as far as I can tell, so therefore I think this is a market that will continue to favor the downside, as the Federal Reserve continues the tight monetary policy, and there are a lot of concerns about inflation and slowing down when it comes to the global economy. With that being the case, the market is more likely than not going to continue to see more of a “fade the rally” type of situation.
At this point, it’s also worth noting that toward the end of the last hour, sellers came in and pushed the market down. That being said, the market is likely to continue to see a lot of noisy behavior, and I do think that given enough time we will struggle. Ultimately, I believe this is a market that will continue to be very noisy, so you need to be cautious with your position size. It’s very difficult to imagine a scenario where the stock market suddenly takes off, but at this point, it’s going to be interesting to see whether or not the jobs number will make for a bigger move, or if it will squash any type of rally. We are most decidedly in a bear market at the moment, so I don’t think that we are suddenly going to see everybody jump into the stock market.
Right now, you can make an argument that we are in the descending channel, and you need to pay close attention to once we get toward the top of it, near the 3900 level. Underneath, if we break down below the lows of the last several days, then the market opens up down to the 3700 level, perhaps even to the 3650 level which opens up even further losses.
