- The S&P 500 had a very tough October, which is not a huge surprise considering that there is so much going on around the world.
- The war in Gaza of course will continue to have a major influence on what goes on, and therefore I think you got a situation where the market is likely to continue to see a lot of volatile moves based on the latest headlines.
- The 4200 level is an area that seems to be of importance, and if we can recapture that, perhaps we can see some type of recovery overall.
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On a rally from this point, you could see a move to the 50-Week EMA, maybe even the 4300 level. Signs of exhaustion get sold into from what I can see, unless of course we can break above that 4300 level on it weekly close. We have essentially hit the “measured move” of the head and shoulders pattern at the top, so now the question is whether or not we continue to go lower?
If we break down below the lows of October, it opens up the possibility of a move down to the 4000 level, and then perhaps even down to the 200-Week EMA which is lower than that. Ultimately, this is a market is trying to sort out whether or not we can continue to see a move to the upside, or if the earnings season, geopolitical concerns, and interest rates rising could come into the picture and continue the downward pressure.
I do think that this is going to be a very difficult month, but the S&P 500 index is highly influenced by something like 5 stocks, which account for roughly 24% of the move. In other words, it’s just a handful of stocks and several hundred other ones that are essentially going nowhere. Because of this, the index is not indicative of what’s going on in the stock market, as most of the stocks out there have essentially done very little, at least over the last year or so. I believe that we are at a very precarious point at the moment, and I do think that a short-term rally with signs of exhaustion bringing in more sellers does make a certain amount of sense. However, Wall Street will try to find some type of narrative to push the market higher and therefore you have to be cognizant of the latest “fad” out there. Expect a lot of noisy trading this month.
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