- The S&P 500 has exhibited a lateral trend in recent days, and the start of the week didn't show any significant deviation from this pattern. All factors considered; my perspective is that this market remains inclined towards bullish sentiment.
- The primary driver of this optimism hinges on the widespread belief that the Federal Reserve is poised to ease its monetary policy, or at the very least, halt its tightening trajectory.
- If this scenario materializes, stock traders will inevitably respond in kind, reverting to their natural inclination to buy.
Additionally, we should factor in the potential for the "Santa Claus Rally" to manifest in the coming weeks. This tradition has seen traders on Wall Street engaging in year-end stock purchases to demonstrate ownership of the "right" stocks to their clients.
In the event of a pullback, I anticipate a substantial pool of buyers ready to swoop in. At present, I pinpoint a potential support level around the 4400 mark, an area that previously posed significant resistance. Under these circumstances, it presents a classic "buy on the dip" scenario, though this assumes a meaningful retracement even occurs. Alternatively, we might witness a surge towards the 4650 level above, challenging the prior peak. At this juncture, it boils down to whether we see a short-term pullback or an immediate ascent.
Avoid Shorting the Market
Adding to the bullish sentiment is the 50-Day EMA, residing beneath the 4400 level and on an upward trajectory. This moving average could potentially lend additional support to the market. This of course is yet another thing for people to pay attention to.
In any case, I have no inclination to adopt a bearish stance on this market. Wall Street appears resolute in its intention to accumulate stocks heading into the year-end. It's important to note that the S&P 500 is not truly a composite of 500 stocks; rather, it's primarily propelled by a select few, typically numbering between 7 to 10 key players.
All things being equal, the S&P 500's recent trading behavior indicates a state of equilibrium. However, the prevailing sentiment remains bullish, driven by expectations of a Federal Reserve policy shift and the looming "Santa Claus Rally." Whether we witness a pullback or a surge, the market's underlying dynamics seem poised to keep pushing it higher, making shorting an unattractive proposition in this volatile environment.
Ready to trade our S&P 500 analysis? Here’s a list of some of the best CFD trading brokers to check out.