The S&P 500 has pulled back to kick off the Monday session, but it still looks very bullish, and I think a lot of traders on Wall Street are going to try to push the narrative of the “Santa Claus rally.”
The S&P 500 fell to kick off the trading week, as Monday was a bit negative. All things being equal, this is a market that is very bullish, and should continue to be going forward, at least into the end of the year as Wall Street has been trained to expect a rally at the end of the year, and of course we have recently seen a lot of buyers jump into the market to show signs of value hunting any time it pulls back. All things being equal, it’s only a matter of time before we have to sort out whether or not we are going to be forming a bit of a “double top”, or if we blow through that potential area.
I think the only thing that you can count on is a lot of noise, but is probably worth noting that the VIX is at an extraordinarily low level, suggesting that there is a lot of buying pressure, and very little fear. There is a little bit of a contrarian signal and the fact that the VIX often gets very low before we see some type of selloff, but regardless, I think any pullback at this point in time is going to be somewhat limited, due to the fact that so many people are chasing performance this time a year. Underneath, the 4500 level would be an area of interest, followed by the 4400 level.
On the other hand, if we turn around and rally from here, it’s likely that we go looking to the 4750 level, which is the next major resistance area that we could see targeted. All things being equal, if we do pullback from here, I think it’s a situation where you are just looking for value that you can take advantage of. Wall Street is going to continue to be very erratic, but at the end of the day, it’s likely that all of the recent bullish pressure will continue to be something that people pay close attention to.
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.