S&P500 – tactical buy opportunity
It is extremely difficult to predict market moves in days like this. Pre-Christmas markets and overall December was catastrophic. At first it was not dovish enough Fed, then sell-off continued when markets were spooked by Trump’s Fed-busting tweets and latest panic started when Mnuchin famously twitted about meeting with top banks’ CEO’s…This tweet was clear sign of desperation and nervousness and the timing is awful – thin, volatile and illiquid markets before a holiday.
We still have few trading days within this year and it is impossible to predict with any degree of certainty what will happen. Trump expressed his confidence in Mnuchin – which supposedly shall calm the markets. Trump also told journalists: “I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.”
It is a big question, if this will be sufficient to stimulate any sort of relief rally. I believe the next reporting season will be a litmus test – whether the market has any fundamentals sufficient for rally.
Technically both weekly and daily charts are extremely oversold. I personally think we are approaching the temporary bottom (the key word is temporary) and bounce is very much likely at around current levels. Price still likely to test 2270 and therefore the area between 2270 and 2340 is a buy area. Needless to say that position sizing and risk-management are of paramount importance. Do not forget, the liquidity is very thin still.
Have a nice day !