- The S&P 500 initially pulled back just a bit during the early hours on Thursday, only to turn around and show signs of life.
- The 5700 level continues to be an area of interest as it was previous resistance, and therefore, I think the market memory comes in and the buyers support it.
If we bounce from here, the market probably goes looking towards the $5,760 area, perhaps $5,775, before taking off to the upside. It's clear that the market continues to celebrate the idea of the Federal Reserve cutting interest rates, and therefore, I think we will continue to see the S&P 500 go higher, at least for a while.
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The Target Above?
A target of 6,000 really isn't that outrageous at this point and ultimately, and I wouldn't be surprised at all to see this market hit that level. However, if we were to break down below the 5,660 region, then we could test the 50 day EMA. Remember, Wall Street doesn't really care about the economy. What Wall Street cares about is liquidity. And if the Federal Reserve is going to flood the system with more liquidity, it will drive down the value of the dollar, at least in theory, and it will send assets higher, such as stocks. It's a bit of a false sense of gain, but the reality is the numbers go higher and for the most levered players, that's all that matters.
It's not really whether or not this buys you more than this as far as purchasing power is concerned. I do believe that the S&P 500 will continue to be a “buy on the dip index.” If that ends up being the case, I believe that the market will eventually find its way to higher levels, specifically the 6000 level that I mentioned previously. I don't have any interest in shorting the market, at least not in the time being.
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