- It should come as no surprise that the S&P 500 performed very little during Monday's trading session given that electronic trading, particularly in Asia and Europe, was the primary cause of it.
- However, the underlying index was naturally closed on President's Day, which tells me that the market is only lingering in this consolidation level following Friday's sell off.
- But bear in mind that there were two trillion dollars' worth of expiring options on Friday. There's only so much you can take from it.
- Currently, buying opportunities will be presented by short-term pullbacks into the 4950 level and potentially even the 4800 level.
Floor in the Market?
We do have a possible floor in the market because the 4800 level is located exactly around the 50 day EMA. Buying chances arise during short-term pullbacks, and I do believe that we might eventually rise considerably higher.
The current fair value level is at 5000, which remains a crucial pivotal price point. I believe a lot of people would view it as such because it's also a field where psychology plays a big role. Nevertheless, I still buy dips and pullbacks. It is not my intention to short the S&P 500. Although it appears powerful, it is a bit excessive.
Keep in mind that this is all about the Federal Reserve and what it does with its monetary policy, and it has almost nothing to do with the economy beyond the fact that inflation could keep the Federal Reserve tight with its monetary policy. If that’s going to be the case, then traders may start to sell stocks, but as things stand right now the handful of stocks that tend to push the index higher continue to perform, and therefore it’s difficult to get aggressively short of this market or anything else stock related.
I think at this juncture, we are likely to continue to see a lot of noisy behavior, but eventually every time we pull back, value hunters will come back into the picture and try to take advantage of “cheap contracts” in the futures, and of course passive investing continues to throw money at the same handful of investments that are the bulk of the weighting for this index.
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