So, let me ask you if you’ve heard this before: the Fed is getting ready to pivot? This is what we’ve seen over the last couple of days as the Manufacturing PMI number was a little lower, but more importantly the Reserve Bank of Australia only raised by 25 basis points instead of 50 as anticipated. This has everybody on Wall Street assuming that free and cheap money is coming back into the game, which is what they been raised on for 14 years. However, the Federal Reserve no longer day trades the market along with them, so it does not have the same self-serving purpose of front running its announcements.
Markets Are Going to Fall
The Federal Reserve continues to talk about the inflation situation the United States and have us quite frankly stepped out and said that they know that there is going to be a lot of economic pain out there, meaning that they know that the markets are going to fall. That doesn’t necessarily mean that it’s going to fall from here, but we are clearly in an area where you would start to see a little bit of trouble. If we do rally from here, it’s possible that we could go look into the 12,000 level. The 12,000 level is an area that I think a lot of people will be paying attention to, especially as it is a large, round, psychologically significant figure, and also where the 50-Day EMA is approaching.
Summary
- The market is likely to continue to be very noisy and try to rally on some type of reason, but when you look at the longer-term charts, you can see that we are clearly in a downtrend and have not change the overall structure of the market in order to turn this thing around and have a go in a bullish market.
- If we break down below the lows of the last couple of days, then it’s likely that we could go down to the 10,500 level, or perhaps even the 10,000 level.
- Ultimately, this is a market that I think continues to see a lot of volatility, but any signs of exhaustion will be jumped on, and I will not hesitate to start shorting this market.
All things being equal, I have no interest in buying tech, but I think this rally was probably very needed at this point.
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