- The S&P 500 Index rallied quite nicely on Friday, and we threatened the top of the shooting star from the previous day.
- If the market does break above the top of the shooting star, then it opens up the possibility of the 4300 level being targeted.
- The 4300 level is an area that I think you will have to continue to see a lot of interest in, as it had been massive resistance previously.
If we were to break above the 4300 level, then it is possible that the market would really start to take off at that point. Not only would it be a break of significant resistance, would also show the market clearing the 200-day EMA, which is obviously a very bullish sign as well. At this point, we are getting a little overextended, but this is all about the interest rates in America more than anything else.
Tightening Monetary Policy
The Federal Reserve lost so much credibility over the last 14 years that the market is completely ignoring the fact that they continue to reiterate that they are going to tighten monetary policy. These clowns have spoon-fed Wall Street for so long, that they do not understand the idea of a tightening monetary policy for any significant amount of time. Because of this, the market is swimming upstream, but if there does come a point where Wall Street finally believes that the Federal Reserve is going to fight inflation for real, this market is going to crater.
What it is worth, markets typically gain about 20% during bear market rallies, and we are clearly at that point over in the NASDAQ. In other words, we could be getting close to the end, and that’s why think the 4300 level above is so interesting. The candlestick on Thursday looks like a really good beginning to a pullback, but at this point, it looks like we still have some work to do. If the market is comfortable holding the S&P 500 E-mini contract through the weekend, that would be a very bullish statement as well. At this point, I would not chase the market, but you certainly cannot sell it until we see something happen in the bond market that shows traders are taking the Federal Reserve seriously again.
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