In this area, it is likely that we would see short-term dips as buying opportunities, which keeps the market bullish, so I do not see any argument for shorting this market.
The S&P 500 rallied a bit on Tuesday as we have broken above the 4600 level quite handily. At this point, the S&P 500 continues to find buyers on dips, and at this point in time I might even make the argument for it being a bit over-extended. At this juncture, the 4500 level should be a major support level to pay close attention to, and I will be watching this market for signs of support on a pullback to that area. The 4500 level is an area where we would see a certain amount of psychology come into the picture as well.
The market has been very positive for quite some time, so we are probably due for a significant pullback, but at this point in time I think even if we were to break down below the 4500 level, it is possible that we could go looking towards the 50-day EMA which is sitting at the 4458 level. We are slanting to the upside when it comes to that 50-day EMA, so I think we will continue to see plenty of momentum overall. The 5000 level I think is the target now, although it is obviously a longer-term target.
One thing that you should pay attention to is the fact that it is the fourth quarter that we are in now, and a lot of people out there are going to try to catch up for their returns to be shown at the end of the year for clients. After all, a lot of funds out there have underperformed, so at the end of the year we tend to have the so-called “Santa Claus rally” that a lot of people refer to. This is simply where fund managers try to chase the market in order to make money and keep their clients happy.
In this area, it is likely that we would see short-term dips as buying opportunities, which keeps the market bullish, so I do not see any argument for shorting this market. In fact, it is really not until we break down below the 4250 level that you could make that argument, which is essentially light years away from where we are right now. We are going higher and dips only provide value in a market that is driven by liquidity.