The S&P 500 pulled back just a bit during the trading session on Monday, as we are threatening a major breakout. The 4600 level course is an area that a lot of people will be paying close attention to, but ultimately, I think that eventually we will break above there. Underneath, the 4500 level offers major support, just as the 4540 level is as well. The S&P 500 of course is probably going to continue to see people try to push the “Santa Claus rally” into the end of the year, which is when traders are trying to make up for lackluster performance for the year.
As long as we can stay above the 4500 level, I think that the S&P 500 has further to go. That being said, the last week or 2 has been about working off a lot of the excess profit, which is something that the market desperately needed. Because of this, I think you get a situation where you have to be somewhat cautious but look for some type of value along the way. All things being equal, I think you continue to see a lot of “buying on the dip” type of situation.
If we do break down from here, then I suspect that we will “reset the market” in January, and traders will jump in to take advantage of any dip. For myself, it’s very difficult to chase performance at this point, due to the fact that the market has been so insanely bullish. Chasing a performance like that is a great way to lose money, even though it’s very possible that we do breakout for the next week or so. However, the other thing that does make the potential “Santa Claus rally” a little bit of a different situation this year is the fact that we have several central banks announcing interest rates this week, and that of course could throw chaos and noise into the market. With this, I think a lot of the action that we see will come down to Jerome Powell and what he has to say on Wednesday.
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.