The market has been extraordinarily noisy, and I think that continues to be the case.
- The S&P 500 E-mini contract has dropped a bit during the trading session on Tuesday to break below the 3850 level.
- The market continues to see a lot of downward pressure, as we have the Federal Reserve interest rate decision coming out on Wednesday.
- People are readily expecting a hike, but the question is whether we are going to see a significant move of 100 basis points, or if it is going to be 75 basis points, as people expect.
The statement and press conference will be crucial as well since the language will be parsed quite closely. After all, the market is always trying to figure out what the Federal Reserve is going to do next, and at the slightest hint of a crack in the door when it comes to loosening monetary policy, the S&P 500 will take off. Because of this, I suspect that Jerome Powell will be extraordinarily hawkish, just as he was in Jackson Hole when he told everyone that “some pain will have to be seen.”
Waiting for Selling Pressure
The 50-Day EMA sits just above the 4000 level and is dropping. At this point, the market is going to have made a big move to the outside, but that should only end up being a shorting opportunity. However, if we were to break down below the last couple of candlesticks, it opens the move to the 3800 level. The 3800 level is a significant support level, perhaps opening the possibility of a move down to the 3650 level where we had bounced from quite drastically.
The market has been extraordinarily noisy, and I think that continues to be the case. Whether or not we can rally during the day on Wednesday is a completely different question, but at that point I will simply be waiting for some type of exhaustion. On the other hand, if we simply break down, then I’m fine with that too. I do not have a scenario in which I am a buyer of the S&P 500, at least not without Jerome Powell explicitly suggesting that he is going to change course, which would be a huge turnaround. At this point, I think it’s only a matter of time before we see further selling pressure going forward.