The S&P 500 rallied significantly during the trading session on Friday, as US dollar got clobbered due to the Bank of Japan coming out and shorting the greenback. By intervening, they cost a bit of chaos in the financial markets, and it does make a certain amount of sense that the market rallied from there. Beyond that, it’s probably worth noting that the SPY ETF had a massive amount of options expiring during the session.
That being said, we are still very much in a downtrend, and we are in the midst of earnings season. The earnings season is a great place where you can see a lot of volatility and noise, therefore I think it is probably only a matter time before the sellers step into this market. The 50-Day EMA sits just above the 3800 level, which has been the top of this overall consolidation region. The market continues to be very focused on a multitude of different things, not just earnings.
- Keep in mind that the Federal Reserve tighten its monetary policy continues to be a bit of a drag on the stock market and essentially the global economy.
- The inflation numbers in the United States are still extraordinarily high, so that most certainly has a lot of influence on what the Federal Reserve will do.
- As long as they have to remain tight, it’s difficult to imagine that stocks will take off to the outside as the Federal Reserve is going to force some type of recession. They are going to be pressuring the system until something breaks, because we are in the “everything bubble”, and not just a normal one. In the past, you’ve had housing bubbles, technology bubbles, crypto bubbles, and the like. Now, we are trying to get out of a bubble that features almost all assets.
To the downside, the 3600 level is supported, so if we break down below there, then it’s likely that the S&P 500 drops another 100 points down to the 3500 level at the very least. Either way, I do not have any interest in buying the S&P 500, due to the fact that there’s so much risk out there at the moment and of course the markets are freaking out at every new headline lately. The volatility is probably going to get worse, not better.
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