- The S&P 500 rallied a bit during the trading session on Wednesday but gave a gain to show signs of exhaustion.
- In fact, while we are getting ready to close the market, it looks as if we are going to settle on an inverted hammer.
- The 50-Day EMA sits underneath this inverted hammer, which is right around the 3900 level.
- Because of this, I think the 3900 level will remain a major support level, so if we were to break down below there, then it obviously shows a lot of weakness. At that point, I would anticipate that the S&P 500 would fall rather hard.
Speaking of falling, there is a gap underneath that has yet to be filled, meaning that the S&P 500 could go down to the 3800 level. On the other hand, if we were to turn around and take out the top of the candlestick for the Wednesday session, then you can see this market go looking to the 200-Day EMA, which that’s above the 4000 handles. The 4000 handle obviously is a large, round, psychologically significant figure, and an area where I think a lot of people will be paying close attention. After that, we then have the 4100 level, so I think there is a lot of noise above that will continue to work against this market.
Waiting for the Federal Reserve
Furthermore, you should also keep in mind that the Federal Reserve has a meeting next week that a lot of people are going to be paying attention to. The Federal Reserve is likely to remain tight for much longer than people anticipated. Ultimately, this is a situation where I think there’s probably much more downside risk than upside, although we most certainly had an area that probably captures quite a bit of attention.
You can also make an argument that we are in an up-trending channel and testing close to the bottom of it. Because of this, I think if we do fall below the 3900 level, it will kick off a bit of a cascading effect that has people shorting the market. Furthermore, you must keep in mind that we are heading into a recession, and that will continue to weigh upon the idea of owning stocks anyway.
Ready to trade our S&P 500 daily forecast? Here are the best CFD brokers to choose from.