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S&P 500 Technical Analysis
The S&P 500 has gone back and forth during the trading session on Friday, as the 3700 level continues to offer a bit of downward pressure. The low of the day was essentially the same as the previous session, so the question now is what will happen after options expiration? It will cause a lot of volatility, and general volatility is not a good thing, but you don’t really know how dealers are set up at the moment.
That being said, we are in a downtrend, so I look at rallies as a potential selling opportunity at the first signs of exhaustion, and therefore I like the idea of fading rallies as they occur. On the other hand, if we break down below the lows of the last couple of days, I think 3600 will get tagged pretty quickly, and then perhaps even 3500.
There’s nothing to suggest that the S&P 500 is ready to take off to the outside, beyond the fact that we may get the occasional “bear market rally”, the reality is that the rallies will be sold into. I don’t see any reason why this would change, as the Federal Reserve continues to tighten monetary policy, but at the same time, we have the slowing down of the economy.
The Federal Reserve has essentially told everybody it’s going to break something, and at this point it looks like it’s going to be the stock market. I have no scenario in which I’m a buyer at this point, at least not without the Federal Reserve getting involved. We’ll have to wait and see whether or not the narrative changes, but right now it’s all ugly, and I think it’s going to stay that way.
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This article was originally posted on FX Empire