The S&P 500 surged quite drastically during the trading session on Friday after initially gapping higher. The market gapped higher, fell to fill the gap, and then rallied again. At one point, it looked as if we were going to form a nasty-looking shooting star. However, once the Europeans went home the Americans started buying everything, they can get their hands on.
This might be a little bit of “hometown bias” as the Americans start to price in the idea that the Federal Reserve will not tighten as aggressively as once thought. I do not know about that, but we are in a period where the Federal Reserve is not going to be speaking, as we are getting relatively close to a meeting. With that being the case, I think the market may try to push the market higher based on hope, but I also think that it is only a matter of time before somebody says something that gets people thinking about higher interest rates as well.
As I record this video, we are breaking above the 4300 level which is the bare minimum I needed to see in order to start thinking about buying. At that point, we could think about going to the 200 Day EMA, which is currently at the 4400 level, but I think the market pulling back is also a possibility. The fact that we close at the top of the candle does suggest that we will have a little bit of follow-through though, so I think in the short term we get a push higher, followed by a lot of profit-taking on Friday. It is also worth noting that options expiration is Friday, so that could come back into the picture as well.
The structure of the market is suggesting that we are looking at a potential “double bottom”, and that in and of itself could be crucial to pay attention to. I think ultimately, we have got a situation where we could see traders betting on that, but I think the only thing you can probably bet on is a lot of volatility more than anything else. Given enough time, we will more than likely correct any type of move that happens, especially if it is violent. I think this is going to continue to be a major issue going forward, so be cautious with your position size.
