The S&P 500 initially dipped lower in the overnight Globex session, but then turned to show signs of life near the 200-day EMA. At this point, the market still has an important barrier in the form of the 4500 level, which is of course a previous significant support level. If we could break up there, it would change a lot of things. However, this rebound has already shown a bit of hesitation at midday, so it’s hard to imagine this suddenly being the change in trend that everyone is looking for.

S&P 500 Video 01.02.22

The only thing that works for this is the fact that the 200 day EMA is standing right here. However, keep in mind that the 200-day EMA is just a psychological barrier more than anything, and quite frankly, we had been a bit oversold. Much will depend on risk appetite and whether or not people believe a recession is coming. If you think the Federal Reserve is doing too much, you don’t want to take the risk of owning these types of assets.

I believe we could get a short-term bounce, but I also believe that the 4500 level is going to be very difficult to break through. If we fail at this point, we will simply re-enter the consolidation we have been in for the past two days. A breakdown below the bottom of this consolidation would of course be toxic, but at this point it is very hard to imagine a situation where everything will be easy over the next couple of days.

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