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Stock Markets Take a Break Ahead of Non-Farm Payroll

Cory Russell

Aug 05, 2022 15:46


As we swing back and forth between the Friday news, the S&P 500 has been trading a little sideways throughout the day.

Technical Analysis of the S&P 500

The S&P 500 fluctuated throughout the session on Thursday since we are barely below the 200 day moving average and, of course, we have to be concerned about the employment report on Friday.

Given that circumstance, I believe an explosive move is most likely only a matter of time. If everything remained the same, one may believe that this barrier should hold, but the S&P 500 might really take off if we were to break over the 4200 mark. Although that is not my worst-case situation, I must have it in the back of my mind when I trade this.

The 4100 level, in my opinion, is critical. A far deeper correction may be seen if we were to drop below that level. We drop another 100 points or so at that moment and start looking at the 50 Day EMA.

Unfortunately, whether or not the Federal Reserve will tighten monetary policy any more forcefully depends entirely on perception. While the Fed adamantly maintains its capacity to do so, the market does not believe it. It's highly likely that the stock markets will see a little decline if the American employment report on Friday is hotter than expected. Traders will view this as yet more justification for the Federal Reserve to closely monitor its monetary policy, perhaps leading it to tighten further. In any case, I believe we are a bit overdone in the near future, but always keep an eye out for the opposite side.