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I suspect we may be drifting a little bit higher, only to turn around and fall apart again.
The S&P 500 was all over the place on Tuesday as it looks like traders are trying to figure out what to do with themselves. At this point, the 3800 level seems to be a bit of a magnet for the price, so it’s likely that we will revisit this area often. That being said, there are a lot of questions out there when it comes to the future of the market, and what we are going to do going forward.
The candlestick does look a little bit supportive, as it is a bit of a hammer. In this scenario, buyers could come in on dips, but I think it’s going to be short-lived in general. After all, the market has plenty to worry about, not the least of which will be the fact that the Federal Reserve is going to continue to tighten monetary policy, so it’s very likely that we continue to see downward pressure over the longer term. Because of this, the market continues to see opportunities for selling on rallies that show signs of exhaustion, something that I think is almost certainly going to be coming.
The 3900 level is an area that should be resisted, right along with the 50-day EMA which is breaking below the 4000 level and dropping. The 3750 level should offer support, and if we break it down below there it’s likely that the market goes down to the 3700 level. After that, the market could unwind quite drastically. The attitude of the market continues to be one that’s very tentative, but keep in mind that bear market rallies can be very violent. That might be part of what we had seen during the day, as the futures markets had melted down during Asian and European trading. Nonetheless, we are not that far from seeing selling pressure again, so I will simply stand on the sidelines and wait to see how it plays out over the next couple of days. Remember, Friday has the jobs number coming out of the United States, and it’s worth noting that the market will probably be kind of quiet once we get to Thursday. I suspect we may be drifting a little bit higher, only to turn around and fall apart again.
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