There are a lot of technical reasons we will find buyers.
The S&P 500 rallied on Tuesday to hit the 4800 level, but as you can see we turned around and fell as we continue to struggle for hold. This shouldn’t be a huge surprise though, as it’s the first week of the year and we need a bit of clarity before we put in a lot of money to work. Friday’s job count will also have its influence, so it should be relatively straightforward at this point.
Dips at this point should continue to be buying opportunities, but I also think there is significant support below in several areas, particularly near the 50-day EMA below. I am currently at the 4646 level and is up suggesting that we have a lot of falling buyers and a lot of value hunters waiting to happen. The market has been in an uptrend for quite some time, and it makes sense that we see a lot of pressure below continuing to lift this market.
The S&P 500, like other US indices, is clearly a situation where you can only trade in one direction, as the Federal Reserve will pick up on that market whenever it drops a significant distance. Therefore, I think short-term withdrawals will be taken into account, as many value hunters will continue to look at this through the prism of “the Federal Reserve will do the right thing.” Yes, we’re talking about a Federal Reserve pullout, but they’re never going to do anything close to actually shrinking their balance sheet because quite frankly the markets can’t handle it. Yes, they’ve been faking it recently, but at the end of the day we’re stuck in a scheme where the Federal Reserve is essentially put in a corner.
The 4500 level below should continue to be massive support, based not only on the psychology of the big figure, but that we’ve seen a bit of a rebound from there more than once. There is a trend line below, so there are a lot of technical reasons we will find buyers.