- The S&P 500 has fallen rather hard during the day on Friday as we continue to see a lot of negativities after the Jerome Powell press conference on Wednesday.
- We are below the 50-Day EMA, which shows a significant amount of negativity, and we are even below the 3900 level at this point. The market ends very negatively at this point, but I think that we could get a little bit of a return to a bounce as the Friday candlestick would have been massively influenced in an outsized manner by the $4 trillion worth of options expiration.
Rallies at this point would still be looked at with a lot of suspicions, and I will not hesitate to be short of this market at the first signs of exhaustion. The 50-Day EMA would of course be a very interesting place to start shorting, as it is sitting just above the psychologically important 3900 level. Even if we were to break above there, it’s worth noting that the 200-Day EMA sits right around the 4000 level, and we have a major downtrend line that sits just above there. That trendline has held significantly multiple times, so it is something that is worth paying attention to.
Entering into a Blackout Period
As we head into the holiday season, it’s very likely that liquidity can be an issue, so we may have the occasional erratic move if news crosses the wire and then liquidity. Just as equally likely, we could see the markets do very little. However, it’s worth noting that we are entering the blackout period when corporations cannot buy their own stock so there’s going to be a lack of buying pressure in the market.
Pay close attention to the interest rates in the United States, because if the 10-year note starts to see higher rates, that will drive money out of the stock market and into the bond market. All things being equal, this is a market that looks like it’s ready to continue going lower, but I think we may get a short-term bounce that we can take advantage of eventually. However, if we were to break down below the bottom of the candlestick on Friday, I will not hesitate to start shorting there. The only thing that I can say is that position sizing is crucial this time of year.
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