S&P 500 Forecast: Traders Pull Away Ahead of Jackson Hole

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It is only a matter of when, not if to buy this market.


The S&P 500 has pulled back a bit during the trading session on Thursday, as traders will be focusing on the 10 AM Eastern Standard Time speech by Jerome Powell coming out of Jackson Hole, as it will give us a bit of a “heads up” as to where we are going monetary policy wise. At this point, the market is likely to see a lot of volatility, as it has been very bullish, but there are concerns because several Federal Reserve Gov.’s suggesting that they need to be more hawkish than previously thought, and that of course has people worried about a monetary policy tightening. If that is going to be the case, it takes away some of Wall Street’s profits, and they do not like that.

Nonetheless, we are still very much in an uptrend and there are a couple of areas just below that could offer opportunities for buyers to get involved. To begin with, there is a nice uptrend line that we have been following for what seems like ages, and of course we have the 50 day EMA sitting right around the same price. As long as that is the case, I think is going to be very difficult to break down rather drastically, unless of course the Federal Reserve comes out extraordinarily hawkish, which I do not think is the base case scenario. That being said, it does seem more likely that there is a higher bar to cross for a double surprise than a hawkish one.

If we were to break down below the 50 day EMA and the uptrend line, then I think we go looking towards the 4400 level initially, and then possibly the 4200 level. After that, then we have the 4000 level coming into the picture which I think is the absolute “floor in the market”, as not only do we have the 200 day EMA in that area, but we also look at that as a potential 10% correction, which is pretty standard when it comes to trends. Anything below there would almost certainly prompt some type of Federal Reserve action, as they are clearly in the pocket of Wall Street and have been for at least the last 13 years. With this being the case, it is only a matter of when, not if you buy this market. A break to the upside and a clearance of the 4500 level opens up the possibility of a move to the 4600 level.