- The S&P 500 fell during the trading session on Thursday, reaching the 4100 level by the time midafternoon head. The question now is whether the 4100 level will hold.
- It looks very dicey at this point, and we are during earnings season, which of course has its own concerns.
- That can cause quite a bit of volatility and therefore a lot of noisy behavior.
If we do fall from here, the most obvious support level will be right around the 4000 level. We have a 50-Day EMA in the 200-Day EMA in that neighborhood and both looking likely to try to take off to the upside. They should offer quite a bit of support, and if we were to break down below those moving averages, that would obviously attract a lot of attention. In that scenario, if we were to break down through those indicators, I think we would probably see a rush down to the 3800 level. The 3800 level has been an area that has been important in the past, so I think it would attract attention. Anything below there then sends the market down to the 3600 level.
Keep Your Position Size Small
Breaking above the 4200 level sends everybody higher, reaching the 4300 level in what would almost certainly be a “FOMO trade”, which we’ve seen more than once over the last several weeks. I don’t necessarily subscribe to that theory, but it is something that could happen. The markets have seen a lot of volatility as of late, and I think at this point the rally is probably almost done. After all, bear market rallies can be quite brutal, so if we were to turn around and fall from here, it would not be out of the ordinary.
Keep your position size small, but I suspect that the sellers are about the flex their muscles, because since I started writing this article, we have finally dipped below the 4100 level. In other words, the selling pressure is starting to pick up as we are heading into the end of the session, which is generally not a good sign either as larger pension funds start to put money to work, or in this case, perhaps take money out of the market. Caution is the better part of valor these days.
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