The S&P 500 initially tried to rally during the trading session on Friday, as traders probably were anticipating the “end of month market.” Having said that, later in the day we started to see a lot of selling pressure, and that could cause quite a bit of panic at this point. After all, we have seen massive reversals across the board in multiple asset classes, not just stocks. With that in mind, I think you have to look at this through the prism of a serious lack of risk appetite, and I think that’s going to continue to be a major problem. Alternatively, this is a market that will find itself looking for some type of narrative to follow next, and of course, the next day that stocks are open will be the first day of the month so therefore you could have people jumping into rebalance portfolios.
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Underneath, the 4200 level is an area that is significant support from a long-term standpoint, and therefore we need to pay close attention to it. That being said, if we were to break down below the 4200 level, then we could open up the floodgates down to the 4000 level. That being said, there are a lot of concerns when it comes to interest rates, and that is not going away anytime soon. I anticipate that we are going to continue to see a lot of trouble out there, and therefore this is a market that I’m very cautious about being involved in.
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- In fact, I don’t like the idea of being involved in stocks at all, and it does look like we are about to see something ugly.
- However, recognize that at the end of the day on Friday, there were probably a lot of positions being changed, so it probably has a lot to do with the end of the month more than anything else.
Ultimately, this is a situation where traders will continue to look at this through the prism of race, and risk is just far too out-of-control now right now to get overly comfortable holding the S&P 500 for a significant amount of time. That being said, it’s worth noting that the 200-Day EMA still is fighting back.
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