The S&P 500 was closed on Monday, but as we have seen over the last couple of weeks, we have been hanging around in a consolidation area between the 3800 level underneath, and the 3850 level a bomb. The market looks rather flat, and with the 50-Day EMA sitting right around the 3900 level, it suggests that we are going to see a little bit of trouble on rallies.
Even if we take off and clear above the 50-Day EMA, the market is very possibly going to go looking to the 200-Day EMA, which sits at the 4000 level. The 4000 level also coincides quite nicely with a downtrend line, so when it’s all said and done, I think this is an area that traders will struggle to overcome. I believe at this juncture, any short-term rally will probably get sold into, especially as there is not a lot of volumes out there, let alone much in the way of conviction at this point.
Market to see a Lot of Volatility
- If we were to turn around and break down below the 3800 level, the market could then go down to the 3700 level, possibly even down to the 3600 level.
- As we have pulled back from a major downtrend line, I think it’s more likely than not going to be a situation where we do have a longer-term downtrend, but that doesn’t necessarily be that we get there right away.
- Short-term rallies that fail to hang on the gain could be nice selling opportunities, especially between that 50-Day EMA and the 200-Day EMA, so pay close attention to that general vicinity.
In the short term, I would anticipate a lot of back and forth, but once we get that job number on Friday, it’s possible that we could see some type of decisive move. I also believe that the market will continue to see a lot of volatility and questions asked of it, so I don’t think it’s going to be a situation where we have a lot of ability to get long of this market, at least not anytime soon. However, if the jobs number suggests that we are not going to see the Federal Reserve need to get aggressive, then that might be a bullish sign, but at this point, I think the market will be in somewhat of a holding pattern in the short term.
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