- The S&P 500 has broken heart to the downside during the trading session on Friday as Jerome Powell has finally convinced Wall Street, that he is serious about fighting inflation.
- By doing so, the market dropped roughly 3%, slicing through the 50-Day EMA.
- The market looks as if it’s ready to continue a longer-term downtrend, and that the rally might be over.
The fact that we are closing at the very bottom of the candlestick of course suggests a lot of negativity as well, so I do think that it is probably only a matter of time before we break much lower, perhaps even trying to test the lows again. This does not necessarily mean that we get there overnight, but it certainly looks as if we are going to continue to see a lot of downward pressure. I think now, it’s likely that the downward pressure should continue to overwhelm any time we get a little bit of a short-term rally. Signs of exhaustion will be jumped on, and I think now it’s obvious that even the most hardheaded of Wall Street traders have finally concluded that Jerome Powell meant what he said, which is interesting considering how many of his compatriots have been saying the same thing over the last couple of weeks.
Dollar Likely to Go Higher
The size of the candlestick is worth paying close attention to, and now that we are closing at the very bottom of it means that there is plenty of conviction. Furthermore, we are now outside of the area between the 200 Day EMA and the 50 Day EMA indicators, and therefore we have squeezed out of this range. The market certainly looks as if it’s in trouble, and therefore a huge decision has been made, and therefore I think the 4300 level has the makings of a short-term top.
If we were to turn around and take out the top of the candlestick from Friday, then it’s possible that we could go looking for the 4300 level, but it’s very difficult to imagine that scenario after today’s action. Beyond that, the US dollar is ripping higher, and it does work against the value of stocks in general. With that, I think sellers are finally having their day in the sun again.
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