S&P 500 Forecast: Index Gives Back Gains at 3800 Level

Christopher Lewis

In general, I just don’t see any reason to buy this market.

The S&P 500 rallied a bit on Wednesday to reach as high as 3800. However, we saw some selling pressure in that area and then pulled back. While this is still a positive session, the reality is that the selloff late in the day does suggest that there is going to be selling pressure. Whether or not we break down from here is a different question, but right now it looks like we are more likely than not going to continue to see a lot of downward pressure, and I think it’s only a matter of time before we see the overall trend continue.

If we were to turn around and break above the 3800 level, then it’s time to start shorting at a higher level. I have no interest in trying to get long of this market, even though we are oversold. That being said, one of the things that we can look into is the idea that perhaps this area might be an area of consolidation and working off some of the froth from the downtrend. At this point, I think it’s probably not until we break above the 4000 level that you can take any rally seriously, and it’s difficult to imagine seeing anything along the lines of an uptrend forming until we get above the 4200 level.

On the downside, the 3650 level is an area of minor support, and if we break down below there, it’s likely that the 3600 level will get targeted. After that, then it’s more likely that 3500 is targeted. Yes, we have sold off quite drastically, and a massive bear market rally is always a threat, but right now it appears that we have more selling to pressure than anything else. Remember, they have not written down economic forecasts on a corporate level yet, so once those numbers come down, a lot of multiple traders will start to look at the PE ratio and start selling again. Either way, this is a market that is extraordinarily negative, and I think it still has further to go. Pay close attention to the 10 year yield, because when it rises, that puts even more selling pressure on this market. In general, I just don’t see any reason to buy this market.

S&P 500 Index

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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