The S&P 500 found a little bit of support early during the trading session on Thursday, as it looks like we are trying to stabilize a bit and stay within the previous consolidation range that we have been in. At this point, there are plenty of traders out there that are looking to celebrate the “Santa Claus rally”, despite the fact that it was a very vicious and nasty trading session during the day on Wednesday. If we can stay in this range, then I think we simply go sideways and wait until the jobs number comes out on Friday. Ultimately, that would be a huge victory, but I think at this point in time you have to look at it through the prism of whether or not we can hang out in this area, or if we need to pull back.
If we do break down from here, then the 4500 level would be the next support level, followed by the 50-Day EMA underneath, which sits just above the crucial 4400 level. Either way, traders are trying to find some reason to get long of the market, despite the fact that we had shot straight up in the air for the last several weeks. The turnaround during the trading session on Wednesday was rather vicious, so it will be interesting to see what market participants do during the day on Thursday heading into the jobs number, as they may have gotten shaken a bit. When you look at the longer-term turf though, we are just simply killing time at the moment, which does make a certain amount of sense considering we gained something like 11% in a couple of weeks.
Position sizing will be crucial, and it’s very likely that we will continue to see interest rates drive the market and where it goes. Lower interest rates tend to be better for stocks, at least to a certain point. If we do start to see a spike in interest rates, that also could hurt stocks, so keep an eye on the 10 year yield going forward. In general, this is a market that I think is almost impossible to sell, although it’s obvious that we are extended.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.