The S&P 500 has gapped higher to kick off the trading session on Tuesday, as we await the testimony coming out of Jerome Powell in front of Congress. That being said, it is very likely that the Federal Reserve Chairman will say something dovish to push the market even higher. Ultimately, there is a significant amount of support underneath at the 50 day EMA and the uptrend line, so I think this all lines up quite nicely.
This looks like a “buy on the dips” type of market, and it would not take much to get to the all-time highs again, perhaps reaching towards the 4400 level. Ultimately, I have no interest in shorting this market, as the trend is very much to the upside and of course the Federal Reserve will do whatever he can to keep the markets afloat. That being said, if we were to break down below the dip earlier this week, it is likely that we could go looking towards the 4000 handle, which is a large, round, psychologically significant figure as well as an area that has a massive gap.
Breaking down below that level would open up the possibility of buying puts, but as far as shorting this market, it is almost impossible to do as if it gets some type of negative reaction, the Federal Reserve will almost certainly do something to walked back the hawkish tone of the last couple of statements, which quite frankly they have already began to do. With this, I anticipate that the uptrend should continue going forward, and therefore it is very likely that the buyers will retain control.
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