S&P 500
The S&P 500 spent most of the month of February struggling a bit and then trying to recover, but every time we recover it seems like there’s some type of headline coming out of the Middle East that has the markets concerned. And quite frankly it’s not just the Middle Eastern headlines, it’s more or less the influence they have on the interest rate markets.
That being said, I think you have a situation where we are looking at this through the prism of whether or not the interest rates continue to look more attractive than taking the risk that equities could be. Further beyond that, you also have to keep in mind that a lot of technology stocks, which make up a larger part of the S&P 500 than they ever have, will be very sensitive to the higher interest rates.
Technical Analysis and Market Fear
So, with this, we begin to look at the market from a technical analysis standpoint, and it is worth noting that we have formed several long wicks to the upside as we continue to fall. That to me suggests that there is a massive amount of fear out there. VIX was right around 30 at one point and that of course has a negative influence on the stock market as well. This simply will mean that people are fearful in general, and as a result, rallies simply aren’t trusted at the moment.
Overall, though, I would watch the 6600 level. If we can break back above there or we get some type of resolution to the conflict in the Middle East, that’s probably what kicks off the next leg higher. Otherwise, we will visit the 6200 level and possibly even the 6000 level sometime during the month.
Unfortunately, it is difficult to analyze a market and get some type of clarity in an environment like we have right now. And as long as that’s the case, I suspect rallies will be looked at with suspicion until we get peace and perhaps as a consequence of that peace, lower interest rates in America.