The S&P 500 has rolled over during the trading session on Thursday to break below the 4600 level. By doing so, this does show a certain amount of weakness, but I also suggested yesterday that perhaps we would have to pull back in order to keep up the momentum. Keep in mind that the Friday session as the jobs number obviously will have a major influence on what happens next. At the very least, it will cause significant volatility.
The 4500 level underneath is what I believe will be significant support, especially as the 50 Day EMA continues to run towards it. The 4500 level will be an area of extreme interest, because not only do we have the 50 Day EMA, but we also have the options market that will be very interested in that area. Furthermore, the size of the candlestick is somewhat convincing, as we have broken it down to close at the very bottom of the candlestick. This does suggest that perhaps we have further to go, and therefore I would anticipate that there might be a bit of selling in the short term.
Keep in mind that the market will continue to hang around the 4600 level as a bit of a magnet for the price and should continue to be interesting for most traders. The fact that we have closed the way we have suggests that we are going to continue to go lower, perhaps reaching towards the 200 Day EMA which sits at the 4400 level. It is rising, and it does suggest that there are plenty of buyers underneath. In general, the market is going to continue to be very choppy, and it most certainly will be noisy during the jobs report.
At this point, it appears that the markets will be paying more attention to what happens with the Federal Reserve than anything else, and more importantly, the expectations of interest-rate hikes and whether or not the Federal Reserve will continue to be as hawkish as they had suggested previously, or if they will start to soften up. Quite frankly, the market will be focusing on the interest rate expectations in the futures markets more than anything else. I expect a lot of noisy behavior, but am willing to bet that sooner or later, Wall Street will come up with an excuse to believe that the Federal Reserve will save it. After all, it has for the last 13 years.
