- I am paying close attention to the 5500 level for this asset.
- The stock market has seen a lot of volatility this week, as we have seen massive rotation out of the same handful of stocks that have driven everything higher, and into smaller companies.
- This has benefited such indices as the Russell 2000, but at the same time has punished some of the biggest winners.
As we are heading into earning season, it’s not difficult to imagine a scenario where we will continue to see a lot of volatility. Nonetheless, this is a market that I think will continue to be very noisy overall, and therefore you need to be cautious about your position sizing. Pay attention to all of the usual suspects, meaning Microsoft, Apple, etc., and recognize that those handful of stocks can make a huge difference in the overall index value. Remember, the S&P 500 is not an equal weighted index and therefore it doesn’t necessarily behave the way you would anticipate it to at every twist and term.
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Technical Analysis
The technical analysis for the S&P 500 is rather bullish in the long term, but at this point in time we are just simply waiting around to see whether or not the support area near the 5500 level holds. Underneath there, we have the 50-Day EMA near the 5450 level, and that should offer a bit of support as well. With that being the case, the market is likely to continue to see value hunters coming in and picking things up, but I also recognize that this is a market that needs to let you know that the buyers were coming back in. Quite frankly, there’s no real interest whatsoever on my part in trying to get short of this market, because it has been so bullish for so long. Remember, indices are not equally weighted, so it only takes a handful of stocks that really turn these things around. Because they are built like that, it’s essentially a “long only asset” most of the time.
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