Index Has Rallied Very Significantly Again

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This looks like a bear market rally, which happens from time to time.

The S&P 500 Index has rallied significantly during the trading session on Tuesday as we continue to see a bit of recovery.
This is a market that looks like it’s going to continue to take any clue it can to get bullets, which is typical in a bear market.
This is especially true when you’ve had 14 years of cheap and free money for people to gamble with.
That’s essentially what the Federal Reserve has done at this point, enabled nothing short of gambling.

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Will the Federal Reserve Reiterates Its Position?

Last night, the Reserve Bank of Australia decided to raise interest rates by only 25 basis points, and that has the gamblers on Wall Street pressing the button suggesting that the Federal Reserve may start to pivot as well. Ultimately, this is a dangerous way to go, and I do think that there is the possibility we will see a lot of disappointment. Quite frankly, the Federal Reserve comes out and reiterates its position, we may very well see the stock market turn right back around.

Keep in mind this is a market that is in a severe downtrend right now, and a severe downtrend does have the occasional bear market rally. Bear market rallies are some of the most vicious that you can have, but at this point I think we’ve got a scenario where we will eventually run out of momentum, and when we do it’s likely that we drop. The 3600 level has offered a significant support level, and it looks like we are going to continue to respect that area, at least at this point.

To the upside, the 4000 level is the obvious barrier that people will have to deal with, and at this point I think we will continue to see that offer a lot of psychological resistance. Furthermore, it’s also worth noting that the economic outlook for the majority of the world is rather poor, so earnings are going to be tanked. The 3900 level was previous support, so it should now be resistance based upon market memory, and of course the fact that the 50-Day EMA is there. If we get any type of exhaustion candle in that area, I’m comfortable shortening this market because it’s got no business behaving the way it is right now. Ultimately, this looks like a bear market rally, which happens from time to time.