- On Monday, the S&P 500 experienced a brief rally during the trading session but quickly gave back its gains.
- This choppy behavior is likely to continue in the short term, with the 3800 level serving as a significant support level for the market.
- However, if the market does manage to rally from here, the 4000 level will be an area of focus for traders due to its psychological significance and the presence of the 50-Day EMA and the 200-Day EMA indicators.
One strategy that could be effective in this environment is to fade short-term rallies, as these have worked well so far. However, if the market breaks down significantly and closes below the 3800 level, this could open up a move down to the 3600 level, where the market bounced from back in October.
The recent bailout of Silicon Valley Bank by federal regulators has added to the uncertainty and volatility in the market. This bank is a major player in the technology startup and technology company sectors, and concerns about contagion are weighing on investors' minds. The market was already weak before this news, so it is likely that the back-and-forth movement will continue in the short term.
Be Cautious
Given the volatility in the market, it is essential for traders to be cautious with their position sizing. These massive swings and panic moves in both directions can cause significant damage to a trading account if a trader is overexposed. If a trader does choose to trade the market, they may want to consider options or smaller CFD positions to minimize their risk. After all, larger futures positions can get very expensive if you are on the wrong side of a sudden knee-jerk reaction.
Ultimately, the S&P 500 is likely to continue to be noisy and choppy in the short term, with the 3800 level offering significant support and the 4000 level being an area of focus for traders. The recent bailout of Silicon Valley Bank has added to the uncertainty and volatility in the market, making position sizing crucial for traders. Fading short-term rallies could be an effective strategy, but traders must remain cautious and adapt to the ongoing volatility in the market. With this being the case, protecting your account is going to be the most important thing you can do at the moment.
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