- The S&P 500 has shown some strength in the early hours of Tuesday, but resistance is likely to be an ongoing issue as we reach an area that has caused some problems recently.
- It is the beginning of the earnings season, so there are still many headlines that could cause issues for the market.
- Traders should be on the lookout for signs of exhaustion to start fading, but it does not necessarily mean that the market is going to fall apart.
- The 4100-level underneath should provide significant support, with a 50-Day EMA racing toward it.
On the other hand, if the market can break significantly above the 4200 level, it could potentially go looking toward the 4300 level. The market is still basing most of its moves on earnings season and the idea that the Federal Reserve is going to be the focus. Liquidity has driven the entire rally over the last 14 years, and everyone is waiting to see whether the Federal Reserve will bail them out.
Pay Attention to Position Sizing
All things considered, this is a situation that is reaching the upper reaches of its overall range, and a pullback would not be surprising. However, a complete collapse is a different question, and it is not something that traders should hold their breath for at this point. Although there are many questions being asked about the economy, it will likely only lead to more volatility. Therefore, position sizing will be the most important thing that traders should pay attention to. The stock market is going to be a dangerous place in the short term, but in the longer term, it tends to rise. This may be part of why people are still stuck on the "buy the dip" mentality.
In conclusion, the S&P 500 has shown some strength in the early hours of Tuesday, but resistance is likely to be an ongoing issue. Traders should be on the lookout for signs of exhaustion to start fading, but it does not necessarily mean that the market is going to fall apart. The 4100 level should provide significant support, with a 50-Day EMA racing toward it. On the other hand, breaking significantly above the 4200 level could potentially lead to the market going toward the 4300 level. The stock market may be a dangerous place in the short term, but in the longer term, it tends to rise. Traders should pay attention to position sizing and be prepared for more volatility soon.
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