The S&P 500 fell a bit on Wednesday as the 50-day EMA has offered a bit of resistance. At this point, I think the market is more or less waiting for the CPI figures coming out on Friday to determine where we go next. The world is waiting to see what the Federal Reserve is going to do, and the CPI numbers for the month of May could be yet another piece of the inflationary puzzle that traders will pay close attention to.
If we break down below the 4100 level, it could open up and move down to the 4080 level. If we break down below there, then it’s likely that we will go looking to the 4000 level, and then eventually the 3900 level. On the upside, if we turn around and take out the 50-day EMA, it’s likely that we will see an attempt to get to the 4300 level. The 4300 level is a major barrier to overcome because it has been so significant previously. If we do break above the 4300 level, that could be a significant turn of the market.
Looking at this chart, it’s likely that we would see a lot of volatility in the short term, but I do think that it is only a matter of time before we have to make a bigger decision. The S&P 500 has rolled consistently on liquidity more than anything else, so it’s going to come down to what the Federal Reserve’s going to do. The economy doesn’t matter at this point, nor has it mattered over the last 13 years for the most part. Ultimately, this is a market that I think eventually will have to make a bigger decision, but between now and Friday I think it’s going to be difficult to have any real follow-through on any move.
For the Thursday session, you might be better off sitting on the sidelines, but if you are a short term trader, you may look at this as a nice range bound situation that you can trade on short-term charts, because that’s all you’re going to get unless something significant happens in the next 24 hours. For those who are a bit more along the lines of a swing trader like I am, this doesn’t offer much in the way of interest.
