- The S&P 500 has fallen a bit during the trading session on Thursday, as we are now below the 50-Day EMA.
- This suggests that perhaps we have a little further to go, and as we are during earnings season, it certainly makes quite a bit of sense.
- The market recently had pulled back from significant resistance from both a historical and a psychological sense.
Looking at this chart, it remains that the 4000 level should continue to be important, as it not only features the 200-Day EMA, but it also features a major downtrend line, which will come into the picture as potential selling pressure as well. Ultimately, if we can break through all of that, then we could go higher, but I’m not holding my breath as there seems to be a lot of negativities out there when it comes to the earnings season.
Market to Favor a lot of Short-term Momentum
As earnings season continues, there is more likely than not going to be worse news, and that will continue to keep the market on its back foot. Furthermore, people are paying close attention to the Federal Reserve, and what they may or may not do. At this point, it seems like a lot of people on Wall Street are hoping that they will step away from tightening, but that seems to be very unlikely. In fact, they probably have a couple more interest rate hikes ahead of them. That weighs upon the stock market in general, and therefore you should pay close attention to it.
If we break down below the 3800 level, we could go much lower, perhaps down to the 3600 level. On the other hand, if we take out that resistance above, then the 4100 level is likely to be targeted. Either way, I think you have a lot of noise coming and should look at it as such. The market will favor a lot of short-term momentum more than anything else, so keep your position size reasonable, and make sure that you stay nice and nimble because you are desperately going to need that in this environment. Eventually, we will get a more sustainable move, but right now there’s simply far too much noise to expect it to be easy over the next several sessions. Quite frankly, we are at a major inflection point and that is probably the most important thing to keep in mind.
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