- The S&P 500 ended the trading session on the back foot, threatening to break down through major support. At this point, it is more likely than not going to continue to go lower, reaching down to the 3800 level.
- At this point in time, there’s no reason to think that the S&P 500 is going to see longer-term strength because quite frankly interest rates continue to rise.
- Ultimately, this is a market that I think we will continue to see a lot of fear in, and therefore it would not surprise me at all to see this market continue to fall every time it rallies just a bit.
The Friday session will be crucial because we will have to begin to think about the idea of whether people are going to be comfortable going short of the market heading into the weekend. If they are, that is a very negative turn of events. The market is likely to see volatility, and it’s likely that we will continue to have a situation where the market will be difficult to hang onto. Ultimately, the best thing you can do is keep your position sizing correct, and by that, I mean relatively small.
Stocks Unlikely to Continue Rallying
If we turn around the rally from here, the 50-Day EMA comes into the picture just above the 4000 level. The 4000 level of course is a large, round, psychologically significant figure, so it’s worth noting that a lot of people will be paying close attention to that area, and I think it’s likely that we would see sellers in that area. The market will continue to see a lot of volatility in that area, that’s assuming that we can even get there. Underneath, I would anticipate that the market is more likely than not going to go looking to the 3700 level, an area that had previously caused a significant bounce. Breaking through there is like going into a black hole, quite frankly there’s no real way to know where you end up at that point. Regardless, this is a market that I will be feeding short-term rallies and, at the first signs of exhaustion. Interest rates, a strengthening US dollar, and a global recession are not things that are going to be conducive for stocks to continue rallying anytime soon.
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