The S&P 500 initially tried to rally during the trading session on Wednesday but failed to continue going higher or, for that matter, even simply hang on to the gains in general. That being said, the market is still bullish overall, so I think at this point looking at the market through the prism of an uptrend is the best thing you can do. That does not mean that we cannot pull back, and I think it would be welcomed by a lot of traders. The 4300 level underneath would be a support level, although it is a minor one at that.
Underneath that, we have the uptrend line and the 50-day EMA coming into the picture, and those both should offer a certain amount of support. Ultimately, the market should see plenty of buyers in that area, which is a technical region. Even if we break down below there, I think there is plenty of support down at the 4000 level, which is a large, round, psychologically significant figure, and an area where we have seen a little bit of a gap. The 200-day EMA is reaching towards that area as well, which offers quite a bit of support.
On the other hand, if we were to turn around and break above the 4400 level, it is likely that we could continue to go higher. The next target would be the 4500 level, which is a psychologically important level, followed by the 4600 level, as the market does tend to move in these 200-point increments. Regardless, this is a market that I think will continue to attract money as the Federal Reserve continues to flood the markets with liquidity, and Jerome Powell did in fact suggest during the session at the House of Representatives that he was willing to continue flooding the market, as he believes that the inflation is simply “transitory” and should essentially abate. If it does, then there will be no reason whatsoever for the Federal Reserve to tighten monetary policy anytime soon, and by keeping the spigots open, it makes sense that we would see the same behavior that we have seen over the last 13 years.
