Crash Testing Significant uptrend line
The easing of the US dollar could help this market, but the greenback looks very strong as the bond market continues to attract a lot of attention.
The S&P 500 fell sharply in Monday’s trading session to show signs of exhaustion as the markets got a bit ahead of themselves. Additionally, we have seen a massive drop in yields on the 10-year note, causing Wall Street to panic. At this point, the S&P 500 is right on the 50 day EMA and the massive bullish trendline that has held the market in check for some time, so the question now will be whether or not we can continue. .
If we fall below the candlestick low for Monday’s trading session, it is likely that the market will continue to fall. It doesn’t necessarily mean we’re going to have a massive collapse, but maybe something like a substantial correction. That wouldn’t necessarily be a bad thing, as it gives you the opportunity to gain some value. Below I see the 4200 level as the initial support, but I think it is much more important that the market stay above the 4000 level than anything else.
The 4000 level has a spread that people will pay close attention to, not to mention the 200-day EMA is starting to spread towards this area. Beyond that, there is a great psychological importance attached to this number, so I think this is essentially what we consider to be the “market floor”. Also, that would represent a drop of 400 points from highs, which would correspond pretty well to a drop of around 10%, which is common when it comes to corrections.
If we look back from here, we need to erase Monday’s losses for the market to turn bullish again, or maybe maybe just walk along the uptrend line in a very slow crawl in order to create the inertia needed to go higher. The easing of the US dollar could help this market as well, but the greenback looks very strong as the bond market continues to gain a lot of attention.