• The S&P 500 continues to be very noisy, as we are hanging around the same flag that we have been in for a couple of days.

Freepik

• Whether or not we continue to see buyers in this area, it’s likely that we could see a lot of resistance above near the 4200 level.
• The 4200 level is an area that a lot of people will pay close attention to. The 4200 level has been resistant; therefore, I think you get a situation where we could see a lot of sellers in that area.
• However, if we were to break above there, then it’s likely that we could go looking to the 4300 level.

Underneath, we have the 50-Day EMA trying to reach toward the 200-Day EMA, and therefore we could get rather close to a “golden cross”, which is a longer-term bullish signal. Whether or not that is going to send the market higher remains to be seen, but at this point in time it certainly looks as if we are trying to build up some momentum.

Be Cautious with Your Position Size

If we were to turn around and break down below the moving averages underneath, that could open up the possibility of a deeper correction, as we break down below the 4000 level. The 4000-level courses are a large, round, psychologically significant figure, and therefore a lot of people would be paying close attention to it. Breaking down below that area opens up the possibility of a move down to the 3800 level, which is where we had pulled back to, and then bounced a bit. If we break down below that level, it will open up the trap door for further selling pressure.

Either way, I think you’re going to see a lot of noisy behavior, and it’s probably worth noting that the zero-day-to-expiration options markets are being manipulated right now, and that’s part of what’s been causing all this volatility. At this point, the market is more likely than not going to be a situation where the only thing we are going to see is choppiness more than anything else, so you need to be cautious with your position size going forward. Eventually, we will get a bigger move, but right now it seems like we are still trying to figure out what matters.

More By This Author: