- The S&P 500 E-mini contract has gone back and forth during the trading session on Wednesday, sitting right around the 3600 level.
- The Wednesday session featured the Producers Price Index, which is a measure of inflation that was a bit of a surprise.
- Coming out a 0.4% month over month, it was twice what was expected.
- If the Consumer Price Index number on Thursday behaves like that, we would more likely than not see a lot of negative pressure on the stock markets, and by extension the S&P 500 E-mini contract.
It’s worth noting that we are hanging around the 3600 level, because that is an area that has been important multiple times. However, I think that even if we do rally from here, it is somewhat limited and is upward momentum, with the 3800 level above being a potential ceiling. The 50-Day EMA sits just above, and now it looks like we are going to continue to see that offer a bit of a barrier.
Avoid Buying the S&P 500 Anytime Soon
If we were to break down below the lows of the last couple weeks, it’s likely that this market will then go looking to the 3500 level. The 3500 level is an area that will attract a lot of attention from the psychology standpoint, but at the end of the day I don’t necessarily know that there is anything special about it. In fact, I would not be surprised at all to see the stock market continue to fall based upon the idea of tight monetary policy and of course the lack of earnings that will be coming. Speaking of earnings, earnings season is about to kick off and a lot of people will be paying close attention to the forward guidance. It’s difficult to imagine a scenario where the forward guidance is very rosy, as the global economy is going to be slowing down into a tightening monetary policy.
At this point, the S&P 500 continues to be a “pay the rally” type of situation, at least until we see the fundamentals change. At the very least, you need to see the Federal Reserve do something to loosen monetary policy, but even then, I think you have a lot of headwinds beyond that factor that could cause headaches. I have no interest in buying the S&P 500 anytime soon.
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