When it comes to stocks, the whole thing looks a bit tired. That being said, the S&P 500 is struggling with the 4600 level as I record this, but it’s probably also worth noting that it is also during the Federal Reserve announcement that I write this. The Chairman seems to be noncommittal more than anything else when it comes to the future, so I think the stock market is going to continue to get thrown around by the latest rumor.
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Keep in mind that we are in the midst of earnings season, and this of course has a major influence on what happens with stocks. If we were to break down from here, there are multiple areas that I think buyers could come back into the picture, but the place that I would really be interested in would be somewhere near the 4200 level, on a bounce. The 50-Week EMA is in that neighborhood, so I think it makes quite a bit of sense that you would see traders hang about in that area. In that area, you would anticipate a lot of interest in stocks because they would become “cheap.”
Jerome Powell stated that they are probably going to stay tight for some time, and that can work against stocks. Whether or not that actually ends up being the case remains to be seen, but I do think at this point in time you look at this through the prism of a potential short-term pullback in order to offer value. We do prey to the upside, mainly taking out the 4650 level, then it’s possible that we could see the market reach toward the all-time highs near 4800. I don’t want to see that though, because the market has been so bullish for so long.
Another thing to keep in mind is that August is typically a cyclically quiet time of year, so it’s probably worth paying attention to that as well. A little bit of a pullback might actually be healthy, with perhaps buying pressure reentering the market as traders come back to work September. If we break down below 4200, that would be an extraordinarily negative turn of events, but I don’t see that happening without some type of financial shock to the system. With this, I remain more of a value hunter.
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