S&P 500 Technical Analysis
The S&P 500 initially fell during the trading session on Tuesday in the futures market, opening up the possibility of a breakdown. However, we turned around to show signs of life again and the market continues the bounce around in the same general vicinity. I suspect this will probably be the case most of the week, as we are waiting on inflation numbers on Friday. Stock market traders are battling back and forth between the idea of higher interest rates and inflation, and of course the idea of whether or not “Uncle Jerome” will come and save them all.
For the last 13 years or so, the Federal Reserve has acquiesced to Wall Street and filled its coffers with cheap money. The problem now is that we have so much inflation in the United States that the Federal Reserve may have no alternative but to tighten monetary policy. At this juncture, I still think that the S&P 500 is extraordinarily vulnerable, but I do recognize that if we were to break above the 4200 level, we could make a serious challenge at the 4300 level above, which was an area of massive resistance previously.
On the downside, if we break down below the lows of the last couple of weeks, 4000 will be targeted, followed by the 3900 level. I suspect that we are still very much in a downtrend, despite the fact that some would call this a bullish flag. If it kicks off, so be it. On the other hand, if we continue to break down that we simply follow the overall trend. Either way, the area that we are trading at right now is going to be difficult.
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This article was originally posted on FX Empire
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