S&P 500 Forecast: Recovers After Initial Selloff on Wednesday

The S&P 500 initially fell during the early hours of Wednesday, but as soon as everybody left in Europe, the Americans picked up the ball and started to rally again. This makes quite a bit of sense because the narrative on Wall Street is about how the Federal Reserve is going to come bail everybody out, so they do believe that it is only a matter of time before Uncle Jerome saves the day.

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At this point, we still have a major downtrend line sitting just above that is causing havoc, and I think will be difficult to break above. However, we will eventually break above there or break down and have to make a bigger move. In the short term, I think what we’ve got is more noise than anything else, and the fact that we are in the midst of earning season will probably only add to that. If we were to break above the downtrend line, then we could see this market check the 4100 level, possibly even 4200 if we get a little bit of upward momentum.

Choppiness Ahead

• Sometimes, the market chooses to ignore everything and just wants to go in one direction.
• That might be what we have right now, and therefore you need to look at it through the prism of what people are doing, not what is necessarily going to be reality. Yes, eventually the economic reality will hit the market, but right now it looks as if they are not interested in hearing about it.
• The only thing they care about is that inflation is starting to slow down, so that gives them the impression that the Federal Reserve will do what they want, meaning slowing down and tightening, before eventually pivoting, because that’s all most of these Wall Street traders know.

We still have a long way to go before we get the “all clear”, and you also need to keep in mind that the Federal Reserve has a meeting next week that will grab a lot of attention on Wednesday. I think the only thing you can count on is a lot of chop at this point, as confusion continues to be the mainstay of all markets, not just the S&P 500. If we can break down below the 50-Day EMA, we could go looking to the 3800 level, but right now I think it’s more back-and-forth than anything else.

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