The S&P 500 initially rallied in the futures market on Monday but gave bank gains as we approached the 50-day EMA. By doing so, this shows just how little faith there is in this market, as we continue to go back and forth just below the 50-day EMA.
Because of this, it looks like we could very well test the 4100 level again, an area that has a certain amount of psychology attached to it, but also has seen support over the last couple of days. Because of this, I think the market will pay close attention to that area, and if we break down below it on a daily close, it could send more sellers into the S&P 500 futures markets.
On that move, I would anticipate that the 4000 level would be targeted next, followed by an attempt to get back down to the 3900 level. The Federal Reserve is going to remain tight with its monetary policy, despite all of the dreams that Wall Street may have. At this point, it shows that anytime the market rallies, people are trying to recoup losses. This is because they are selling into any signs of strength.
Alternatively, if we were to turn on a break above the 4200 level, then you can make an argument for a more bullish S&P 500, but right now I just don’t see that being the case. It could happen of course, but it just doesn’t look like we have enough momentum to break out of this area. Because of this, I believe this market will continue to be very noisy, but will eventually break down. Pay close attention to interest rates in America, because the 10-year yield jumped above the 3% level yet again, and that is nothing but bad for the stock market every time that happens. Because of this, I think it will more likely than not end up being a situation where we will just take our cues from the bond market. This is the way it’s been for a while, as earnings no longer matter. Federal Reserve speakers will of course have their influence as well, but ultimately this is a market that is nervous to say the least. If we did break above that 50-day EMA, we would more likely than not try to challenge 4300 works even more resistance.
