S&P 500 Forecast: Index Ends the Week Quietly

Right now it looks like the buyers probably have the upper hand, so more of a “buy on the dip” type of attitude would probably be more likely than not.

  • The S&P 500 Index has done very little during the trading session, showing signs of a little bit of negativity and hesitation near the 200-Day EMA.
  • The 200-Day EMA is an indicator that a lot of people pay attention to, but at this point in time it’s likely to mean very little due to the fact that the Friday session was shortened trading.
  • Therefore, it’s likely that we continue to see a little bit of uncertainty.

Buyers Are In Control

If we break out above the highs from last week, then it could open up the possibility of a move to the 4150 level. The 4150 level opens up the possibility of 4200, and then eventually the 4300 level. That being said, you need to pay close attention to what the Federal Reserve is doing, especially as the jobs number will come out on Friday. It certainly looks as if the buyers are trying to take the upper hand at the moment, but if the Federal Reserve has reasons to remained extraordinarily tight, that might cause a little bit of a pullback.

At this point, we are getting close to the end of the year and almost everybody on Wall Street assumes there is going to be a “Santa Claus rally”, which is when money managers start buying things in order to show clients that they are in fact invested in all of the right assets. It’s a situation where the market will quite often rally a bit, but then fall apart at the beginning of the year because quite frankly nobody believes in anything at the moment. You should also pay close attention to the idea of interest rates and what they are doing, due to the fact that higher interest rates for longer could really start to weigh upon earnings.

If we break down below the 3900 level, then we will challenge the 50-Day EMA. Anything below there could send this market much lower but I think in the short term we probably have more chop ahead than anything else. You will probably have to stick to short-term charts, but right now it looks like the buyers probably have the upper hand, so more of a “buy on the dip” type of attitude would probably be more likely than not. Either way, position sizing needs to be paid close attention to.

S&P 500 Chart

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Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.