- The S&P 500 rallied during the trading session on Monday, slamming into the downtrend line that has been so crucial.
- The market is now above the 200-Day EMA, and that of course, is a very bullish sign, but it’s not a complete turnaround quite yet.
- It looks like we are trying to take out to the outside and even though I don’t like the idea of buying stocks, the reality is that the market will determine the price, not me.
Fundamentals don’t matter, momentum doesn’t matter, and nothing matters but price. The market looks as if it wants to go higher, so you have to be advised that a break above the downtrend line would be very bullish, but you should also pay close attention to the double top that form down the 4100 level. If we could break above there, then the market very well could go looking to the 4300 level.
In midst of earnings season
On the other hand, if we turn around to take out the bottom of the candlestick for the trading session on Monday, and I think it opens up a move down to the 50-Day EMA. Anything below there then opens up the possibility of a move down to the 3800 level next. The 3800 level has been important multiple times, so if we were to break down through there, it opens up a bit of a trapdoor down to the lows again. As we are in the midst of earnings season, this could be a reason to believe that the market is going to continue to be noisy, and we could get a little bit more in the way of momentum in one direction or the other. It’s probably worth noting that the most recent low was a higher level, but we have yet to make a “higher high” yet.
The US dollar falling certainly helps, but at this point it’s an open question as to whether or not the Federal Reserve will actually flinch, because while the markets are demanding that they loosen monetary policy, the reality is that the Federal Reserve is very unlikely to do anything like that anytime soon. With this, I think we continue to see more volatility, not less going forward. In general, this is a market that continues to be difficult and therefore you need to be cautious about your position size.
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