S&P 500: The Mistake Both Bulls and Bears Keep Making
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The S&P 500 finished Thursday’s session pretty much where it started. But as quaint as that flat finish sounds, getting there was anything but a smooth ride.
S&P 500 Index-Daily Chart
Before the open, we got December’s CPI report showing inflation picked up a small amount from November. While not terrible, it leaves inflation above the Fed’s target and hints that rate cuts might not arrive as quickly as some investors hoped.
After opening with small gains, the selling hit hard, and the index shed nearly 60 points over a few hours. But when it looked like another big wave of selling was knocking us back to the January lows, supply dried up, and prices bounced.
Luckily, this sideways chop under 4,800 resistance doesn’t surprise regular readers. As I wrote in my Free Analysis Tuesday:
As luck would have it, we hit our head on 4,800 resistance and turned back. But equally expected was another aborted selloff that didn’t go anywhere.
Bulls and bears are jumping all over these gyrations that confirm their biases, only to have those trades blow up in their faces a few hours later. This market is entering a consolidation phase, and it will be a while before we get the next big, directional move. Keep that in mind the next time you are planning a trade.
In range-bound markets, we trade the reversals; we don’t bet on the continuations. Until the market decisively breaks out of the 4,700/4,800 trading range, be prepared for a lot more sideways chop.
