- The S&P 500 index experienced a decline during Friday’s trading session, as the market has been struggling to break out of the technical resistance level of 4200.
- This level has been held as a significant obstacle for the index, making it difficult to push higher. However, the 4100 level is acting as a crucial support level, with the 50-Day EMA approaching to add even more support.
- That being said, we are going through a lot of chops for various reasons.
The current earnings season is adding a level of uncertainty to the market, making it important for investors to pay attention to how companies perform during their earnings calls and how they provide forward guidance. Additionally, the influence of eight of the largest US companies in the S&P 500 continues to dominate the market movement, accounting for approximately two-thirds of the index’s gain this year. This means that any negative news from these companies could have a significant impact on the overall market. This will be particularly important as we have already seen Tesla suggest things aren’t going that well.
Be Cautious
Looking ahead, the market is likely to continue with back-and-forth trading, making it essential for traders to exercise caution with their positions. It is crucial to be mindful of position sizing, as the well-defined range could see a sudden and sharp move once broken. Traders should prepare for range-bound trading to continue in the short term and brace themselves for short-term volatility. This can be done either using options or more easily, by position-sizing your trade appropriately.
Although the market is still in a range-bound state, a potential breakout could lead to a significant move. Traders should be cautious and make sure they don’t risk too much in the process. The current inertia building up could offer ample opportunities, but investors must remain mindful of the risks and not blow up their accounts.
At the end of the day, the S&P 500 index remains stuck in a range-bound state, with the technical resistance level of 4200 posing a significant obstacle. The earnings season is adding an element of uncertainty to the market, with the largest US companies influencing market movement. Traders should exercise caution with position sizing, as range-bound trading is likely to continue in the short term, and prepare themselves for potential short-term volatility.
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