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S&P 500 Forecast: Stocks Bounce on USD Weakness – 13 September 2022

The S&P 500 rallied a bit during the trading session on Monday as the US dollar lost a little bit of strength. It is more likely than not going to be a short-term relief rally that is continuing from last week than anything else. When you look at the E-mini contract for the S&P 500, we are getting a bit stretched, and the 4100 level is where you expect to see a resumption of resistance. Short-term bounces like this can be quite brutal in a bear market, so none of this should be overly surprising. In this environment, I believe that we are looking at a bear market rally more than anything else because the bigger picture has not changed.


Look at the chart, the 50-Day EMA offers support, and if we were to break down below there I think that a lot of technical traders would start selling again.The next support level underneath there would be the 4000 level, which would attract a lot of attention as it is a large, round, psychologically significant figure.We recognize that the market is overdone yet again, which seems to be a reoccurring theme.

This is one panic driven move after another, and the fact that we do not have a lot of volume on most days certainly does not help the situation. This is simply an example of algorithms playing games and low liquidity.

CPI numbers come out on Tuesday, and a lot of people are going to be paying close attention to them. This will be especially true for the Core CPI, but at the end of the day the Federal Reserve has already stated that it’s going to tighten monetary policy. I think that the CPI numbers at the end of the day won’t truly matter. In this scenario, it’s very likely that we see more of a “fade the rally” attitude in this market going forward. In fact, it’s not until we get a daily close above the 4200 level that I think the buyers will have finally turned things around for more significant move. This has been a rather sharp turnaround, but that’s nothing new at this point in the game.

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