The S&P 500 has been very noisy during the month of January, and as we head into February there are a lot of questions being asked. There’s an obvious downtrend line that has come into the picture, and I think that the next couple of candlesticks on the weekly chart could determine where we go longer-term.
- The “risk on” attitude is very strong at the time of writing.
- This is typically where you start to see people lose money.
- The 50-Week EMA is sitting right around the 4000 level, and I think that also has a lot of attention attached to it.
- Furthermore, we are in the midst of earnings season, which always cause quite a bit of noise in the market.
It’s probably worth mentioning that February 1 features a Federal Reserve meeting and announcement the people are going to be paying close attention to. The Federal Reserve is not overly enthused or amused that the “animal spirits” continued to jump into the market. Wall Street is still convinced of the Federal Reserve is going to save them by keeping monetary policy loses. I suspect that a lot of what happens in the first 10 days of February will come down to whether or not Jerome Powell succeeds in getting his message across. We all know that he has a long history of not doing so, so that does leave a lot up in the air right now.
If we break above the downtrend line, that could open up a move to 4200, possibly even 4400 if we have enough of a reason to think that we either get liquidity added to the system, or the economy takes off. I suspect that we are going to get neither, so I do remain bearish heading into February. However, once we break above that 4100 area, you have to assume that we are in the midst of some type of break out. Remember, markets front run the next move, so they are trying to get ahead of the Federal Reserve loosing monetary policy. Since the Fed is very likely not going to, and more likely than not keep interest rates high for a long period of time, I suspect there will be a day of reckoning. Whether or not that’s going to be in February remains to be seen.
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