The S&P 500 has rallied significantly during the day on Thursday as buyers continue to look for reasons to get long. Recently, we have seen yields in America show signs of falling, as traders are starting to bet that the Federal Reserve will not raise interest rates as much as once feared. At this point, it will be interesting to see how this plays out from a longer term standpoint, but right now it looks like people are willing to come in and pick up stocks.
Whether or not that ends up being something that sticks is a completely different question, but it’s worth noting that volume has been decelerating on rallies, so one has to wonder whether or not there is a whole lot of momentum behind them? The 4100 level above will offer resistance, extending to at least the 4150 level. I will be looking at the Friday close as a bit of a signal because traders are not willing to take on the risk of holding through the weekend any long positions, which tells me that this is more noise than anything else.
On the other hand, if the market closes toward the top of the range like it has during the Thursday session, then it’s possible that people have enough conviction to make this thing go higher. Above the 4150 level, we would have to challenge the 50 Day EMA which is currently sitting at 4200. After that, the 4300 level has been significant resistance as well and is backed up by the 200 Day EMA. In other words, it’s not that we can’t go higher, it’s just that is going to take a Herculean effort. If we break down below the 4000 level during the day on Friday, it’s very likely that we would go lower, perhaps reaching down to the 3800 level, which is where the bottom of the hammer from last Friday sits. I don’t believe that was the end of the bear market, so at this point in time, I look at this as a rally within the bear market. Rallies within bear markets tend to be very brutal, so none of this changes my attitude right now, but the Friday close could give us quite a bit of information worth following. If we are at the end of the bear market, you should have plenty of time to get in.
