Jumps Around after Powell Speech

• The S&P 500 faced a challenging day on Thursday, but it appears there’s an effort to find stability on Friday as traders await the conclusion of the Jackson Hole speeches.
• In light of this situation, the market is likely to remain tumultuous, and a further retracement is plausible. Whether this pullback warrants long-term concern is a distinct question altogether.
• Presently, it seems market participants are striving to decipher the feasibility of resuming buying activities.
• On Wall Street, there’s always a storyline favoring upward movement in stocks. Thus, the current phase is likely focused on untangling these narratives.

Should we manage to breach the 4500 level, it could propel the stock market to higher ground. However, achieving this would necessitate either complete disregard of Jerome Powell’s remarks or a shift in sentiment. Powell’s speech must be approached with care, as altering just a couple of words could lead to inflated optimism and consequently create challenges for the central bank. Ironically, the Federal Reserve requires a weaker economy to declare victory over inflation. Paradoxically, Wall Street has grown accustomed to the notion that “bad news is good news,” inadvertently working against itself.

A breakdown below the previous Friday’s lows could drive us to the 4250 level, where the 200-day Exponential Moving Average (EMA) is situated. This significant technical indicator will command close attention from many. Assuming constant conditions, it’s reasonable to expect buyers to return sooner or later. Even if the market experiences a decline from this point, it might not necessarily warrant a short position. In that case, the prudent strategy is to step aside and await a market rebound to initiate buying again. If we drop below 4200, the dynamics could change drastically, but currently, that level is quite distant.

In conclusion, the S&P 500 encountered a challenging session on Thursday, and Friday seeks to restore some semblance of stability amid the anticipation of Jackson Hole’s speeches. The market’s near-term trajectory is likely to be erratic, potentially involving further pullbacks. The question of lasting concern arises separately. The ongoing task appears to be reconciling different narratives. Breaching the 4500 level could herald higher market levels, but this would hinge on specific factors. Powell’s speech carries substantial weight, given its potential influence. A retreat below the previous Friday’s lows could lead to the 4250 level, marked by the 200-day EMA. This pivotal indicator holds significance. Buyers are anticipated to return eventually. Even if the market dips, adopting short positions might not be advisable. In that case, a strategic retreat followed by a re-entry during a market bounce is prudent. A substantial shift would require dropping below 4200, a distant scenario for now.