- The S&P 500 E-mini contract pulled back from the crucial 3900 level during the trading session on Tuesday as the market is waiting to see what happens with the Federal Reserve interest rate decision and of course the meeting/press conference/Q&A session.
- Ultimately, the market is likely to continue to see a lot of volatility, but with the JOLTS announcement coming out with over 10 million jobs available in the United States.
- It’s difficult to imagine a situation where inflation is suddenly defeated, if for no other reason than the wage inflation is going to continue to be an issue.
Having formed a bearish engulfing candlestick during the day, it does suggest that we could pull back to the 50-Day EMA, and quite frankly I think it does make a certain amount of sense. I also believe that we could break through there, since the market is going to continue to see a lot of negative influence.
Toward the Downside
At the very least, we are more likely than not going to see the Federal Reserve shock the market, since they are not only going to raise interest rates, but they are going to be very vicious about it. They must, as inflation is far too high in the United States, and it’s difficult to imagine that disappearing anytime soon.
Rallies at this point will have to deal with the 3900 level as a potential barrier, but if we were to break above there, then I think it’s possible we could be looking at a situation where the market goes looking to the 4000 level, but it also would take time to get up there. If we can break above the 4000 level, that would be a huge deal, but it seems to be very unlikely anytime soon. The market has had a nice rally, but I think this rally is starting to run out of momentum, because quite frankly the narrative that Wall Street has told itself is coming undone before his very eyes. With this, I suspect that we have further to go to the downside. I believe that the 3600 level could be the target of the next several weeks, but it may take a while to get there as there has been a lot of volatile movement to the upside.
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