The S&P 500 fell hard on Tuesday, slicing through the 3900 level. At this point, it looks as if the S&P 500 is going to threaten the 3800 level, and perhaps even lower than that. The market is likely going to continue to be one that gets sold off every time it tries to rally, as the market is so bearish. This is a market that has a massive barrier in the form of 4000 above, and it’s not until we break above there that you can take any rally remotely seriously.
The 50-day EMA sits just above the 4000 level, and if we can break above there, then it’s possible that we could pick up a little bit more momentum. However, the market breaking above the 4200 level is what is needed in order to have this market really take off to the upside. I don’t see that happening, at least not without the Federal Reserve doing something to help risk appetite, as the market seems to continue to worry about the idea of monetary tightening.
The length of the candlestick is rather long, and the fact that the market is closing towards the bottom of it does suggest we probably have further to go, but keep in mind that shorting the market is always a bit of a tricky move to make, as indices in the United States are not built to fall for any significant amount of time. Short-term rallies continue to be selling opportunities, assuming that we even get one. The 3700 level underneath could be supportive, and after that, the 3650 level could be important.
If we were to turn around and take out the top of the channel, then it’s possible that we could see a little bit of momentum, but one of the potential stories that people are talking about is “end of the month rebalancing” to send the market higher, but that may have already happened last Friday. Nonetheless, this is a market that continues to offer plenty of selling opportunities as we have seen for quite some time, and until the Federal Reserve changes its tune, it’s very likely that we will have to see Jerome Powell himself start to suggest that interest rate hikes are not going to happen. The bond markets certainly don’t believe that’s going to be the case.
