- The S&P 500 rallied just a bit during the trading session on Friday, as it looks like we are trying to get back to the 4100 level.
- This is a market that has been rather noisy, and I think it will continue to be.
- When I look at the Thursday candlestick, there’s obviously a lot of selling pressure out there, but it appears that we are trying to build up the market again.
First Target Above Is 4300
The area between the 4100 and the 4200 levels is very noisy, and therefore I think it will be difficult to break through. That being said, if we were to break above the 4200 level, I think that the market could really start to take off at that point. I would anticipate that it would be the next leg higher, with the first target being the 4300 level. Anything above that obviously gets even more bullish. This is been interesting to pay attention to, because the stock market seems to be completely ignoring the Federal Reserve, and is trying to destroy the old narrative of “don’t fight the Fed.”
The 50-Day EMA sits right at the 4000 level, which is also where the downtrend line from the previous channel sets. I think given enough time, we probably have a situation where there would be a lot of support there if we do in fact pull back. Breaking down below that would obviously be very negative, opening up another 200 points to the downside.
More likely than not, we will continue to go back and forth based upon the earnings season and latest announcements. Furthermore, it does look like the US dollar is trying to strengthen, so that’s probably something worth watching as well. If it does take off, that typically is negative for the S&P 500 as it makes US exports much more expensive. It can also be a sign that people were rushing into bonds, which of course works against the S&P 500 as well. The only thing you think at this point in time you can count on is going to be a certain amount of choppiness, and therefore you need to be cautious with your position sizing. We will eventually get a large expansive candlestick, which is something that we will have to pay close attention to.
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