S&P 500 Forecast: May 2023

The S&P 500 has been back and forth for some time now, and unfortunately I don’t know if May is going to change the overall attitude of the market. There are a lot of reasons to think that the market is probably going to have to try to figure out what it wants to do with self longer-term because we have seen a lot of “whistling past the graveyard” by Wall Street.

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Wall Street is currently looking for some type of liquidity push from the Federal Reserve, and therefore any hints that the Federal Reserve may be dealing with the tricky situation has them automatically thinking “cheap money.” Having said that, the market seems to be ignoring the fact that the Federal Reserve is hell-bent on fighting inflation. The market seems to be making up its own narrative, as we continue to see price act as if the Federal Reserve has already decided to start flooding the market with fresh liquidity. While that may eventually end up being the case, right now, it is not.

• The 50-Week EMA currently sits right around the 4033 level, and therefore I think you have to look at this through the prism of a “buy on the dip” mentality.
• If we do break down below there, then I think we have more of a correction ahead.
• Unfortunately, the outlook for this market is so murky at the moment that is very difficult to put a lot of money in one direction or the other.
• Despite the fact that there are not a lot of economic reasons to think that stocks should be something you should be fine with, the reality is that the price action looks a lot like it wants to break above the 4200 level. If it does, then it becomes a much more bullish scenario, with an attack on the 4300 level, possibly even 4400.

Sometimes, the markets can completely ignore everything for a while, and then suddenly things get uglier and eventually people start selling risk assets. As things stand right now, we are not at that point so I would not be surprised at all to see more consolidation through the month of May, especially as we are getting rather close to summer, which is traditionally a very quiet time of year.

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