The S&P 500 has rallied rather significantly during the trading session on Thursday to reach the 3900 level. At this point, the market looks as if it is trying to decide whether or not it is going to continue to break out to the outside, but we have the jobs number coming out on Friday which could have a major influence on where we go next. Because of this, I think we have the possibility of a complete reversal, or perhaps a move to the 50 Day EMA.
It’s difficult to guess where we are going next, but it is worth noting that we have a massive downtrend on our hands, and although we have seen a nice turnaround over the last week or so, the reality is we have a long way to go before things truly change. With that being the case, I like the idea of fading rallies at the first signs of exhaustion, and it would not surprise me at all to see a massive move on Friday. The problem of course is guessing where we are going to go next.
The size of the candlestick is rather impressive, and therefore it does suggest that there is at least some interest in going higher. However, it’s worth noting that the volume over the last several days has been less than impressive, so it does suggest that perhaps this might be more of a short-covering rally than anything else. Federal Reserve monetary policy continues to be a big problem, and therefore people are going to be cautious about getting overly bullish, but there are a certain amount of traders out there willing to gamble on what’s going to happen next. Until something truly changes, namely economic information, then it’s difficult to get overly aggressive to the upside.
That being said, if we were to take out the 4000 level to the outside, it’s possible that we could make a move to the 4200 level. At the 4200 level, I would consider this to be a major trend change. At that point, the S&P 500 will completely ignore the economy, or perhaps guess where it’s going next, and go much higher. One thing is for sure, there is going to be a lot of noise, as there is nothing but uncertainty out there.
