The S&P 500 continues to run straight up in the air in what will almost certainly be thought of as a “melt-up.” We have cleared the double top that I had pointed out yesterday, and now there is not a whole lot on this chart that suggests we cannot make the highs again. Because of this, the market is likely to continue seeing upward pressure, despite the fact that there is it is a whole list of reasons to think that the markets will be paying attention.
When you see this chart, you can see clearly that the 4585 level was an area that has been important a couple of times, and because we sliced through it like it was not even there, I imagine that it would be supported based on value on any type of pullback. The recovery has been based upon the idea that the Federal Reserve can get nowhere near the amount of interest rate hikes that the bond market believes, and we are in a situation now where somebody is going to get hurt. It comes down to whether or not the bond market has it right, or the stock market does.
It is possible that we will turn around and fall from here, but we need some type of fundamental reason to make that happen. There is not enough fear out there, and now this bear market rally has been brutal. The question now is whether or not we can continue to go higher. Based on technical analysis, there is nothing to suggest it cannot happen. The 4800 level could be a potential target, but we are overextended to say the least, so a little bit of value hunting might be the best way forward. As far shorting is concerned, we would need to see a reason to do so. I would need to see this market break down below the 4500 level before considering that now.
I stated a couple of days ago that the indices in the United States are not built to show fair value, as they are designed to go higher over the longer term. It is because of this that 95% of the time I think “long-only” when it comes to the futures market. I am now back to that mode of thinking because quite frankly there is no way to get short at this point.