The S&P 500 has fallen during trading on Monday, as it looks like the sellers are starting to overwhelm. At this point, the market is now threatening the 3800 level, as we have formed 5 negative candlesticks in a row. By doing so, we have dipped significantly below the 50-Day EMA as well, and there’s nothing on this chart that looks remotely bullish. Because of this, I think we will continue to see a lot of selling pressure over the next several weeks, especially as liquidity then becomes an issue as we are heading into the holidays. How this pans out in January is a completely open question, but I suppose it’s worth noting that at least there was some buying at the close.
Any rally at this point I would look at with extreme suspicion, and it is worth noting that we had recently failed a downtrend line that has been relatively important for a while. Because of this, it’s very likely that we have a situation where we are just now coming out of a bear market rally again and may have much further to go to the downside. In fact, we could find this market looking at the 3600 level in the next couple of weeks at this rate.
Looking to Start Shorting Again
- Keep in mind that this time of year is very illiquid, so we may not get a lot of movement after the next couple of days. Alternatively, if we get some type of headline out there that has people concerned, the move might be exaggerated.
- Quite frankly, I’ve seen both happen and it’s obvious that the “Santa Claus rally” doesn’t seem to be coming this year.
- Right now, there are money managers out there sweating bullets, because the returns are so miserable, and they thought that perhaps they were going to get bailed out.
Now that they are not, we could see a little bit of exaggerated momentum to the downside as well. I would anticipate that the 50-Day EMA causes resistance, right along with the 4000 level on any bounds. I’m looking for rallies that failed to start shorting again because quite frankly that’s worked well most of the year as interest rates continue to stay high, the Federal Reserve remains hawkish, and of course, a recession is all but guaranteed.
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