- The S&P 500 index did very little during the Friday session other than frustrate traders.
- The market look like it was going to fall out of bed, only to turn around and settle on a slightly positive day.
- The hammer does suggest that there is still quite a bit of buying pressure here, but quite frankly can be interesting to see how Friday plays out as there are a lot of options coming due.
Noisy Behavior Ahead
The market will continue to see a lot of noisy behavior more than anything else, so you will need to be cautious about your position sizing. Quite frankly, I did have a major problem getting a handle on the overall market during the day, as it was one of those days that you are generally better off sitting out. That being said, I do think that a market is more likely a place where you have to let it prove itself. We have had a massive rally, and it’s difficult to get overly excited about a market that has shot straight up in the air. A lot of people out there believe that the Federal Reserve is going to step away from quantitative tightening, while the Federal Reserve swears up and down it’s going to do it. In this scenario, somebody is going to lose, and my suspicion is this going to be the American public.
Having said that, it looks to me like the markets have nowhere to be in the short term, and therefore you have to look at it through the prism of a grind until we get to next week. As soon as we get the next week and get central bankers bloviating about what they are going to do to fight inflation, that’s when momentum picks back up again. There have been a lot of people out there reading dovishness coming out of the Federal Reserve, while there have been several counterbalancing that suggest that they “misunderstood the Fed.” This has been the game that the Federal Reserve’s been playing for 14 years, and now that they are no longer day trading the stock markets, it’ll be interesting to see whether or not they feel the need to save Wall Street as their interests don’t necessarily line up anymore. If we break down below the bottom of the candlestick for Friday, we will probably go looking to the 200 day EMA for support. If we break above the highest of the trading session on Tuesday, then we continue toward the 4500 level.
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