- The S&P 500 has done almost nothing during the trading session on Tuesday as traders continue to wait for multiple central bank speakers at the Jackson Hole Symposium.
- This can have a massive influence on where risk appetite goes, and those speakers will move interest rates.
- Interest rates rising certainly will have a major influence on risk appetite, and therefore it’s a bit of a feedback loop.
From a technical analysis standpoint, the 200 Day EMA sits just above and is offering a bit of resistance, so if we can break above it, we might have the ability to run toward the 4300 level, which is a large, round, psychologically significant figure. That’s an area that has been important recently, and therefore a bit of market memory could come back into the picture. In that scenario, I would anticipate a lot of selling pressure. However, if we were to break above the top of that area, then it’s likely that the market could go much higher, perhaps entering into a bullish trend.
I do not expect that to happen though, because the world has far too many issues out there to think that we are simply going to take off. Ultimately, this market will continue to be noisy, but it’s possible that we may finally get some type of longer-term clarity.
That being said, if we break down below the 50 Day EMA, then we could drop down to the 4000 level rather quickly. That would almost certainly be due to the interest rates tightening and traders suddenly realizing that central bankers will have to fight inflation rather than lift assets, something that they have not done for at least 14 years. This is an issue that the central bank has created itself, as the Federal Reserve has spoon-fed Wall Street for far too long.
Noise and Disbelief Ahead
Because of this, we will continue to see a lot of noise and disbelief but given enough time it’s likely that we will eventually see some type of realization. The realization will more likely than not send this market much lower, but you have to follow what price does because quite frankly the market “should have fallen over the last couple of weeks. Now that we have had this big bounce, we will have to see how things play out.
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