- The S&P 500 has rallied to bid during the trading session on Tuesday, reaching toward the 50-Day EMA and the 3900 level. At this point, the market then fell to reach the 3800 level, as the market continues to go back and forth in general.
- We don’t have any real reason to think that the markets are going to take off to the upside, especially as the jobs number comes out on Friday, therefore it will have a lot to do with what the Federal Reserve does next.
- Keep in mind that tight monetary policy is very negative for stocks.
If we were to turn even more negative and break down below the 3800 level, then we could reach down to the 3700 level, perhaps down to the 3600 level. On the other hand, we turn around and break above the 3900 level, we could get a short-term rally that allows the S&P 500 to go to the 4000 level, which is where the 200-Day EMA sits. Beyond that, there is also a downtrend line that we are going to continue to see a lot of downward pressure at that point.
Looking for Shorting Opportunities
Rallies now should be faded, as we will eventually see signs of exhaustion. The area between the 50-Day EMA and the 200-Day EMA typically offers quite a bit of resistance, and an area where we will cease selling pressure. On the other hand, we do break above the downtrend line, the market could open the possibility of a move to the 4100 level, perhaps even all the way to the 4300 level which is where we had seen a lot of pressure previously.
In the short term, it’s very likely that we see a lot of noisy behavior, so be cautious with your position size, but I do recognize that it’s more likely than not going to find resistance above that we can start to sell off. I believe that the longer-term downtrend is there for a reason, and we are more likely than not going to be an issue where the earnings around the world will continue to drop, and eventually that will weigh upon stock markets, not just this one. Fading long wicks that appear to the upside, then it opens shorting opportunities.
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