S&P 500 Forecast: Finding Buyers on Dips Despite Noise

Christopher Lewis

 It is only a matter of time before we get bullish on any dip.

The S&P 500 initially drifted a bit lower during the trading session on Wednesday, but then turned around to show signs of strength. The market is closing out at 4290, and it looks like the 4300 level will be targeted next. That being said, we could get a short-term pullback in order to find value, and at this point value hunters will be waiting to see whether or not they get an opportunity.

When you look at the chart, you can see there is a nice uptrend line and the 50-day EMA is sitting at that uptrend line as well. Ultimately, this is a market that I think will eventually find its way higher, but we could get a bit of noise due to the jobs number coming rather quickly, so if that is going to be the case, I believe that value hunters will pick this market up based upon any type of short-term pullback. In fact, I would be a bit surprised if we can even threaten the uptrend line, but if we do I think that would be an excellent value proposition.

Breaking down below that level could open up the possibility of a move to the 4000 handle, which is a large, round, psychologically important figure, and the scene of a nice gap. I think that is your “floor in the market” going forward, but it is not that we cannot break down below there. At that point, I would be a buyer of puts only, because it would only be a matter of time before the Federal Reserve would step in and try to support the market. That would represent a roughly 8% loss in the market, and the Fed starts jawboning when we see a 3% drop on average.

The market tends to move in 200-point increments, so I have a target of 4400 at this point, and believe that no matter what happens next, eventually the buyers come in to pick everything up and push much higher. It is only a matter of time before we get bullish on any dip, although Thursday itself might be a little bit soft as people want to take off a bit of risk heading into the figures coming out of the Bureau of Labor Statistics.

S&P 500 Index

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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