Fell Hard as it Headed into Weekend

• The S&P 500 dropped significantly during the day on Friday, losing over 1% as we headed into the weekend.
• The 4300 level has offered a significant amount of resistance, as it is an area that we had seen selling pressure at previously.
• The 200 Day EMA also sits underneath, which is a major indicator as well.
• The market is likely to continue to see a lot of noise in this general vicinity.

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If we do break down below the 200-Day EMA, it’s likely that we would continue to go lower, perhaps reaching the 4100 level. The 50-Day EMA is starting to reach that area as well, so I think that also offers support. This is all about cheap and free money coming from the Federal Reserve, so with this week coming up, I think that a lot of the speeches at the Jackson Hole Symposium will be watched very closely, as the attitudes of central bankers will continue to dictate where interest rates may go. After all, this is all about whether or not money is cheap and free, which it’s not, and it’s getting less so.

Wall Street is starting to look at the possibility of the Federal Reserve having to loosen monetary policy in the future, and that’s part of what we have seen displayed on the chart. That being said, reality may come back into the picture, and it’s likely that we would see equities take a bit of a beating. This bear market rally has been impressive, but if we were to break above the 4300 level, or essentially the highs of the week, then we could go all the way to the 4500 level.

Pullbacks are making sense

The question now is whether or not central bankers can get their message across during the week in various speeches, or if they will continue to muddy the waters. It’s kind of impressive just how much the Wall Street haters have been able to deny what they are hearing from the Federal Reserve. This week could be a change in the attitude, or it may simply be more of the same which would truly be impressive. At this point, I think a pullback makes quite a bit of sense more than anything else.

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