S&P 500 Attempts to Break Out

The S&P 500 has initially dipped lower during the overnight Globex session but then turned around to show signs of life near the 200 day EMA. At this point, the market still has a significant barrier in the form of the 4500 level, which of course is a previous significant support level. If we can break above there, then it would change a lot of things. However, this bounce has already shown a little bit of hesitation midday, so it is difficult to imagine this is suddenly the trend change that everybody is looking for.

S&P 500 Video 01.02.22

The one thing that is working out for this is the fact that the 200 day EMA is sitting right here. However, keep in mind that the 200 day EMA is only a psychological barrier more than anything else, and quite frankly we had been a bit oversold. A lot of this is going to come down to risk appetite and whether or not people believe there is a recession coming. If you believe that the Federal Reserve is overdoing it, you do not want to run the risk of owning these type of assets.

I do believe that we could get a short-term bounce, but I believe also that the 4500 level is going to be very difficult to overcome. If we fail at this point, then we would just simply reenter the consolidation that we had been in over the last couple of days. A breakdown below the bottom of that consolidation would of course be toxic, but at this point in time is very difficult to imagine a situation where anything is going to be easy over the next couple of days.

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