I do think that we are winding up for a bit of a bigger move, but it remains to be seen what the catalyst will be as traders continue to ignore a lot.
During Monday’s trading session, the S&P 500 index was closed, but the futures market experienced limited electronic trading for the day. However, the market has been looking at support just below and Friday ended up forming a hammer, suggesting that the market could turn things around and continue its overall consolidation.
Expect Erratic Behavior
The 4000 level has been an important support level as it has attracted both the 50-Day EMA indicator and the 200-Day EMA indicator. The 4000 level is expected to be very difficult to break down below and is currently the floor in the market. With that being said, it is important to keep in mind that we are in the midst of earnings season, and this has its own influence on the market. We can expect erratic behavior at this point and the possibility of the Federal Reserve keeping interest rates hawkish for longer than anticipated.
Despite the underlying economy not being healthy and inflation still being too hot, Wall Street has the ability to look right past all that. There is a high probability of Wall Street rallying despite the negative factors.
- The 4200 level is an area of interest, and if we break above there, it is likely that the S&P 500 could climb another 100 points.
- Beyond that, we could potentially look into attacking the 4500 level.
- Alternatively, if we turn around and break down below that 4000 level, the next major support level would be the 3800 level, which has been an important level several times in the past.
In conclusion, the market is expected to be volatile due to earnings season and hawkish interest rates. However, the 4000 level should remain as the floor in the market, and the 4200 level would be an area of interest if we break above it. The stock traders may not be paying attention to the negative economic factors, but the market is likely to continue its overall consolidation. Because of this, you may be better off looking at shorter time frames and of course using a range bound trading system, perhaps looking at the Stochastic Oscillator. Nonetheless, I do think that we are winding up for a bit of a bigger move, but it remains to be seen what the catalyst will be as traders continue to ignore a lot.