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The S&P 500 has gapped lower to kick off the trading session on Wednesday, only to turn around and rally a bit to show signs of recovery. However, we have since fallen from there as well, and it certainly looks as if we are going to continue to struggle, perhaps due to Evergrande, perhaps due to rising inflation, or perhaps even due to the fact that we are just now getting ready to kick off earnings season yet again.
S&P 500 Video 14.10.21
The 4250 level underneath should be support, so if we were to break down below there then I believe that the market could go rather negative. The 4250 level is an area that I think has been important more than once, so if we were to break through it then I would be a buyer of puts. There is no way that I would be short of this market, because quite frankly this is a market that will be manipulated to the upside by the Federal Reserve one way or another. With that being the case, I think you have to limit any exposure you have to the downside and a put option is a great way to do that.
If we turn around and rally from the area, then I would be willing to buy this market. I would also be bullish of this market if we were to turn around a break above the 50 day EMA, opening up the possibility of a move towards the 4600 level. I do believe eventually that happens, but it will be interesting to see whether or not it happens now, or if it takes a couple of weeks to get there.
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This article was originally posted on FX Empire