Christopher Lewis
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The S&P 500 has rallied a bit during the course of the trading session on Tuesday as traders are looking to pick up a bit of value. Interestingly enough, bond yields fell significantly, which is a little bit counterintuitive, as the bond and the stock markets are diverging. It is worth noting that the 50 day EMA and the uptrend line have collided and held as support. All things being equal, we are still very much in an uptrend but if we break down below the lows of Monday, it is likely that we could see an acceleration to the downside.

S&P 500 Video 21.07.21

If we do break down, the 4200 level would be a target for support, but we could break down below there as well. At that point, we would more than likely go looking towards the 4000 level which is a large, round, psychologically significant figure, where we have also seen a little bit of a gap. I also believe there is probably a massive amount of options barriers sitting there, as it would represent a 10% drawdown from the highs. That is a simple correction, something that the market probably has needed for a while.

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On the other hand, if we take out the losses from the trading session on Monday, then it is possible that we could go looking towards the 4400 level. This would simply be a continuation of the overall uptrend, as the Federal Reserve does everything it can to keep the markets afloat, and I do think that will probably end up being the way that the market behaves in general. Remember, it is almost impossible to short these indices as they are so manipulated and are not equally weighted.

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