In Wednesday's trading session, the S&P 500 experienced a minor pullback, primarily driven by investors taking profits ahead of the crucial FOMC meeting. As Jerome Powell and the Federal Reserve prepare to reveal their decisions on interest rate hikes, market participants are grappling with the uncertainty surrounding the central bank's approach to fighting inflation while addressing the recent banking crisis.
The 200-Day EMA hovers just above the 4,000 level, a psychologically significant figure that has seen substantial action in the past. Consequently, it is unsurprising to see buyers stepping in if the market pulls back from its current position. A breakdown below this level could trigger a decline towards the 3,900 level, which has recently offered support, followed by the 3,800 level. On the flip side, the 4,100 level appears to present considerable resistance.
Market Continues to be Very Volatile
- A breakout above the 4,100 level could pave the way for a more significant upward move. However, it's challenging to envision a scenario where the market surges unless the Federal Reserve delivers what Wall Street desires: cheap money.
- Presently, the market appears to be trading within a broader consolidation area, marked by heightened volatility and choppiness.
- This trend is likely to persist, but there's a possibility that the Fed's announcement might bring some clarity by day's end. Until then, investors should brace themselves for continued choppy trading conditions.
The markets will continue to be very noisy and probably going to take a look at the future trajectory as an excuse to rally, assuming that Jerome Powell does at least acknowledge the banking situation over the last couple of weeks as something that he’s paying close attention to. After all, Wall Street will find a way to manufacture a bullish narrative, because it’s their job to sell you stocks. Nonetheless, this is a market that I think continues to be extraordinarily volatile and therefore you need to pay close attention to your position size. Trading this market before the announcement and perhaps even a 24-hour period afterward could be very dangerous, because the market tends to have a knee-jerk reaction, and then thinks about everything before making the longer-term move. Nonetheless, we have a couple of levels to watch in the form of 4,100 and 3,900. It’s quite possible that we just bounce around in this 200-point range for a while.
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