Christopher Lewis
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E-mini S&P 500 Index

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The S&P 500 has rallied a bit during the trading session on Tuesday to reach above the 3950 level before pulling back just a bit during midday trading. The S&P 500 has been enjoying a lot of liquidity thrown at it by the Federal Reserve’s loose monetary policy driving money into stocks as bonds simply do not pay anything anymore. Having said that, you should pay attention to the 10 year note due to the fact that it has cracked above the 1.25% yield level, which sooner or later could be a problem for stocks. After all, why take the risk on stocks when you can simply buy paper assets and collect the coupon?

The 4000 level above of course is the target that a lot of people are going to be looking at, due to the large, round, psychologically significant figure. The shape of the candlestick is looking more and more like a shooting star, which of course is negative. This does not mean that I would be a seller, just that we may get a little bit of a pullback in the short term to offer value.

The 3900 level underneath will be an area of support as we have seen over the last week, but quite frankly even if we drop down below there it is likely that the market will find plenty of support at the 3800 level as the 50 day EMA approaches it. Nonetheless, I have no interest in shorting this market, the liquidity alone will continue to push the S&P 500 higher over the longer term as we continue to hear the mantra of “there is no alternative.”

For a look at all of today’s economic events, check out our economic calendar.
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