The S&P 500 has initially fallen during the trading session only to turn around and rally yet again. The market is just bouncing around in a relatively tight range, trying to figure out what to do next. This will more likely than not be answered on Friday, as we get inflation numbers coming out the United States. In the meantime, it’s a great short-term range bound trading type of market, but if you’re trying to play some type of trend, you are more likely than not losing money.
The 4200 level above should offer significant resistance, as the 50 Day EMA sits just below there. If we can break above there, then is likely that the market could go looking to reach the 4300 level after that. On the other hand, if we break down below the lows of the last couple of days, then the market might go look into the 4000 level underneath. The 4000 level is an area that I think will continue to be important from a psychological standpoint, but from a structural standpoint, we have blown through it twice I don’t know how much of a support level that will end up being. In fact, I would anticipate that if we do break down, we are more likely than not going to go looking to reach the 3900 level.
If we can break above the 4200 level, then it opens up a move to the 4300 level, where the 200 day EMA is starting to approach, and of course a place where we have seen a lot of resistance previously. As long as we can stay below there, I think you are still technically in a downtrend. However, if we were to take out the 4300 level to the upside, then the S&P 500 will ignore all fundamentals and continue to climb higher. This is a very possible scenario, as Wall Street always finds a narrative one way or another to rally. Bond yields in America falling over the last couple of days could be that rally point, but the question becomes whether or not earnings actually matter? Judging from the last 13 years, I think you can say they really don’t. It’s about liquidity more than anything else, and therefore you have to follow the price and ignore the fundamentals.
