The shooting star from the session on Wednesday of course is a negative sign, but if we were to break above it, that would of course be a very positive sign. At that point in time, the market could then open up a move toward the 4600 level, possibly even the recent high from August.
All things being equal, this pullback will more likely than not only attract value hunters underneath, near the 4400 level, and the 50-Day EMA right around that same area. All things being equal, this is a situation where the market had broken out of a major down trending channel, and now could use the channel as a potential support level as “market memory” comes into the picture.
We just got the earnings season, and it was not as bad as people had feared, but I would also point out that some of the less widely reported data is looking rather grim to say the least. Credit card delinquencies in the United States are now up to where they were just before the Great Financial Crisis, so it does suggest that perhaps we are about to see something rather ugly. Ultimately, this is a market that I think continues to see a lot of volatility, but at this point in time I think the biggest problem that the S&P 500 is going to face is the simple feature of gravity. With that, I expect to pullback any day.
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