(MENAFN- Daily Forex) The S&P 500 has previously bounced quite nicely, but it's obvious that the last couple of weeks of August has seen quite a bit of selling pressure. This makes a lot of sense due to the fact that markets had completely“whistled past the graveyard” for most of the last couple of months, as traders had done everything, they can to ignore the Federal Reserve.
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However, we have seen a lot of selling pressure after Jerome Powell finally got his point across during the Jackson Hole Symposium as traders are starting to look at the possibility that perhaps they got everything wrong. After all, the Federal Reserve is likely to continue to see inflation as its main issue, and therefore it's likely that the central bank will do everything it can to tighten monetary policy, thereby eventually breaking something. Looking for opportunities to short
It's obvious that the 4300 level is a major resistance barrier now, and therefore I think it will be difficult to get above there. I suspect that most of September will be more or less a“back and forth”, followed by a“back and fill” motion. In other words, I will be looking for an opportunity to short this market every time it rallies, and of course, show signs of exhaustion. I think that will happen quite often, and therefore if you are an active trader, you will find yourself shortening this market multiple times during the course of the month.
- If we broke down below the 4000 level, then it's likely that we could go down to the 3800 level.
- The 3800 level being broken to the downside opens up the possibility of a move down to the 3600 level.
- This is a market that I think has much further to go to the downside, and therefore I think it's probably going to be more back and forth with a negative tilt than anything else.
However, the most likely scenario is that we will have sudden panics during the month, perhaps based on the idea that Wall Street is full of traders that have never had to actually work, as opposed to simply waiting for the Federal Reserve to come in and bail them out. I don't think that happens in the short term, and likely won't be until after something seriously breaks.
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