At this point, sell-offs will simply continue to offer opportunities to get long.
The S&P 500 continues to chug higher as Wall Street celebrates the job losses. After all, the idea is that stimulus is going to come in and flood the markets again, and with the poor jobs number coming out on Friday, that only reinforces the idea that they will get the cheap money that they so desperately need. It has been 13 years, and every time there is the slightest hint of a serious breakdown, the Federal Reserve has stepped in to try to fill the market void. From a technical analysis standpoint, this looks like a market that is ready to go looking towards the 4000 level above.
The 4000 level is the measured move from the previous consolidation area that we had been in, between the 3200 level on the bottom and the 3600 level above it. The 400-point move extrapolated from the breakout does suggest that we are more than likely going to retest the 4000 level as well. With all of the momentum that has been pushed into this market via liquidity and, quite frankly, mania, it does make sense that we will continue to see money chasing that 4000 level above. In fact, it is a major option barrier that will attract a lot of attention as well.
To the downside, even if we break down below the 50-day EMA and the uptrend line, it is very likely that we would go looking towards the 3600 level. After that, the 200-day EMA comes into play as well. At this point, sell-offs will simply continue to offer opportunities to get long.
As a side note, we are seeing things like “Wall Street Bets” grab the headlines, and that tells me that we are getting towards the top. The biggest problem with timing these major bubbles breaking down is that they can last much longer than you anticipate. This is especially true considering that the Federal Reserve is back in it, but one has to wonder what happens when we finally get to the 4000 level? In the meantime, it is buy on the dips and continue to press the issue, as that is exactly what everybody else continues to do. I anticipate that any pullback is going to be very shallow in nature until we get some type of bigger catalyst. This is mainly driven on the hope of stimulus and a vaccine, both of which are still driving sentiment as we speak.