The S&P 500 went back and forth on Friday as we had over $2 trillion worth of expirations in the options market come to fruition. Because of this, the stock market should be taken with a little bit of a grain of salt, as the markets will continue to look at this as a negative market, but one that could get a little bit of a wicked bounce if we get good news coming out of the Ukraine border. Furthermore, words from the Federal Reserve could turn things around, but I do not think were quite ready for that yet.
Notice how the candlestick is relatively neutral and sitting just below the 200 day EMA. If we break down below the bottom of the candlestick for the session on Friday, then we could go much lower. At that point, I think we would probably go looking towards the 4250 handle, which is supportive. If we break down below there, then it is likely we would go quite a bit lower as it would open up the support level and let the market fall on its own. If that happens, I would anticipate a move to the 4200 level, followed perhaps rather quickly by the 4000 level.
If we do rally, it is really not until we break above the 4600 level that I would give it the “all clear” to make a bigger move. I think at this point we are more likely than not to see any rally get sold into, because there is a whole litany of problems out there. Growth is slowing on almost every metric, and even though inflation may slow as well, that is not enough to keep the market elevated for the longer move. Eventually, people are going to wonder whether or not there are any corporate earnings to get involved with, and if there are not, that means we are going to go lower. I would also point out that we are forming a massive “H pattern”, which is also a very bearish technical signal. Again, I would not read too much into the Friday candlestick, because of the options expiring, which tends to make a very funky day to say the least, especially as we get into the afternoon in New York.