- The S&P 500 had a small rally during Thursday's trading session, and it seems like the loose monetary policy of the Federal Reserve will continue to be a major factor.
- However, we have also seen a bit of profit taking later in the session, which is probably going to be the overall pattern. This suggests that the stock market may continue its "Santa Claus rally" driven by strong momentum.
- Short-term dips in prices tend to be quickly bought up by eager investors, and this trend has persisted for a while. While some argue that the market is overextended, it has been in this state for quite some time.
Looking below, we can identify the 4580 level as a crucial area of support, extending down to 4550. The 50-Day Exponential Moving Average is an important indicator for many traders and is expected to provide support as well. Given the bullish sentiment in the market, it's not advisable to consider selling at this time.
FOMO
The market is likely to keep moving higher in the coming days, but there will eventually be some profit-taking, which could be quite sharp. Money managers will need to show profitability to their customers at some point. The market has been quite volatile on the upside, and it seems we've reached the "Fear of Missing Out" (FOMO) phase of the rally.
Regarding a target for the market, it's challenging to predict where it will stop. The 5000 level might sound unbelievable, but given the rapid upward movement in recent weeks, it's a possibility. However, if we approach that level, expect a significant amount of profit-taking.
Ultimately, selling in this bullish market is not advisable, and the focus should be on finding opportunities to buy. However, it's crucial to be cautious, as the market is showing signs of potential overheating. If you're considering entering the market, be aware that it may not be a safe place to hold onto your investments for an extended period, given the current conditions. Because of this dynamic, I am focusing on short-term trades only at this point in time, as the end of the year can be quite difficult to say the least. With this in mind, I think you have to see this as a bullish trend that will be noisy in the next few weeks, but will more likely than not continue into the new year.
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