The S&P 500 has reached all the way up to the 4200 level during the course of the month of February, but then pulled back rather significantly. The month of March is likely to see a certain amount of negativity as well, as traders are starting to worry about whether or not the Federal Reserve is going to pile on with the interest rate hikes.
From a technical analysis point of view, as we close out the month of February, it looks like we’re going to test a significant downtrend line that we had broken out of. So, at this point in time, it’s likely that we will continue to see a lot of questions asked about this situation. Ultimately, I think this is a scenario where we are going to have to see a lot of noisy behavior, which would fall right in line with everything that’s going on. After all, we are worrying about liquidity, and of course the fact that the economy is on the break. We will see a lot of momentum going back and forth, and therefore it’s going to be more or less a short-term traders environment.
If we were to turn around and take out the 4200 level, it’s possible that the market could go to the 4400 level.
- On the downside, taking out the 3900 level, then we could go down to the 3800 level.
- The 3800 level is a swing low, and therefore we need to see whether or not that holds.
- I suspect it probably will, but a break below there opens up the possibility of a move down to the 3600 level.
- I think the only thing you can probably count on is going to be a lot of choppy behavior, and probably nothing that you can hang onto for a big move.
The last several months have been difficult to deal with, and therefore I think you will have more noise ahead, and I don’t know that anything changes other than we may have a little bit more of a negative bias. However, there is so much volatility that things could turn on a dime. The Federal Reserve expectations will be front and center, so pay attention to the 2 year yield, and of course statements coming out of Federal Reserve governors themselves.
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