It makes sense that we would continue to see a little bit of trepidation when it comes to the upside.
The S&P 500 rallied a bit on Tuesday to test the overall 4500 range. This is an area that previously had been significant support, so it does make sense that it should be resistance on the way back up. If we can break above that level, it is likely that we would see a bigger move to the upside. Keep in mind that the market naturally goes higher over the longer term, but this is a situation where there are a lot of fundamental concerns out there.
The market turning around and breaking down below the candlestick for the trading session on Tuesday would be a negative sign, and it could have this market pulling back towards the previous consolidation area. That area should offer plenty of support as it had previously been so noisy, so I think there are a lot of buyers underneath willing to get involved. I also believe that the 200 day EMA could offer a certain amount of support as well. If we break down below that, then it will be interesting to see if we can bottom. In general, this is a market that continues to be noisy, and I think that is the way going forward. The VIX has fallen a bit, so that does give a little bit of hope to the bullish traders out there, but we are still looking at a situation in which we have been damaged from a market perspective, and it makes sense that we would continue to see a little bit of trepidation when it comes to the upside.
Further exacerbating the situation is that we have the jobs number coming out on Friday, and that is something that the markets will pay close attention to. When you have that indicator coming out, it does cause volatility, and for that matter, as we get closer to that announcement, the market will certainly slow down before going all over the place, so you could be lulled into a false sense of security if you are not careful. Nonetheless, it is also worth noting that late in the session we started to see institutional traders push the market higher, so I do think it is worth paying close attention to what happens next.
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