S&P 500 Forecast: Index Continues Quiet Yet Positive Move

Christopher Lewis

 I think that we will continue to see plenty of “buy on the dips” behavior, and therefore I think that there will be plenty of buyers looking for value.

The S&P 500 has rallied ever so slightly during the trading session on Tuesday to make it an all-time high yet again, but it is not hard to see that we are running out of momentum, and perhaps even more importantly, we are running out of volume traded in the market. If that is going to be the case, we could be setting up for some type of pullback as the lack of buying interests could be an issue. That being said, it does not look like there are that many people looking to sell this market either, so we may just simply drift a little bit lower.

The uptrend line underneath continues to keep the market positive, and of course the 50 day EMA is sitting right there as well. If that is going to be the case, I think that is essentially your short-term “floor in the market”, but even if we break down below that level then I believe the 4000 level suddenly becomes the “floor.” This is because not only is it a psychologically important area, but it is also an area where we have seen a small gap form, so that in and of itself should attract a certain amount of inflows.

If we did break down below the 4000 handle, then I might be a buyer of puts, but quite frankly I would not have any desire whatsoever to short this market, because the Federal Reserve has taught us over the last 13 years that keeping the S&P 500 floating higher is the main job, despite the fact that they pretended it is not. They have jumped into the market to jawbone the market back up, they have also bought corporate bonds, and of course have done massive amounts of quantitative easing. In other words, they keep “tinkering with the economy”, and have been using the stock market as a gauge as to where things are going. In other words, the old phrase “do not fight the Fed” has most certainly been the main theme over the last 13 years or so. With this, I think that we will continue to see plenty of “buy on the dips” behavior, and therefore I think that there will be plenty of buyers looking for value, especially as we have the jobs number coming out on Friday that could of course send the market into more momentum.

 

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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