S&P 500 Testing Support

The S&P 500 has gone back and forth during the course of the trading session on Wednesday, as we are testing the 4550 area. This is a general vicinity where we have seen a bit of noisy behavior and support in the past, so it is not a huge surprise to see that support has come back. The question now is whether or not we can break above the top of the candlestick for the Wednesday session? If we can, then it is very likely that we will see this market go much higher, perhaps reaching towards the 50 day EMA. Alternately, if we break down below the 4500 level it could be very ugly, and I think at that point in time we would probably see markets break down significantly.

S&P 500 Video 20.01.22

If we do get that breakdown, I will be a buyer of puts, because it will probably only be a matter of time before the central bank in the United States says something to lift the market. They do not want the stock market melting down, despite the fact that everybody is banking on the idea of at least four interest-rate hikes next year and based upon what we are seen in the bond market, some people were actually expecting as many as five interest rates. That seems to be very unlikely to me, but it is worth paying close attention to, so at this point in time I am a bit cautious about shorting anything, although I would not jump “all in” to the upside either. Position sizing will be crucial at this point in time.

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