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I suspect that the month of April is going to be just as noisy as the month of March.
The S&P 500 has spent most of the month rallying in the face of a whole slew of issues. The question now will be whether or not Wall Street will get its wish, meaning that there will not be that many interest-rate hikes, or if the bond market will prove itself correct? At the end of the day, that is probably the most important question that is being asked overall.
For the last 13 or so years, I have watched Wall Street ignore fundamental strengths and weaknesses, trading solely based on the idea of liquidity. The fact is that the Federal Reserve has facilitated this nonsense, throwing money into the upper echelons of the economy, and ignoring the real economy. This is where we are now, and it will be interesting to see which side they choose: Wall Street or Main Street.
I do not think at this point in time everybody’s going to be happy. Ultimately, this is a market that will have to decide what the Federal Reserve is going to do, but I believe that the Federal Reserve will have to walk a very fine line to make everybody happy, or at least not destroy the market, be it the stock market or the bond market.
At this juncture, it is worth noting that we are testing the previous uptrend line that had been so important for so long. If we can get a move above the 4700 level, we will then take off to the upside and perhaps go looking towards 5000. If we were to turn around and break down below the 4500 level, we could hit the 4200 level. The last couple of weeks have been very volatile and bullish, but ultimately, I think we need to see whether or not we can continue to go higher.
The market would see a lot of noise after a move like this, so you need to be very cautious. In general, I think this is a scenario where we need to keep your position size relatively reasonable, as you should only add to a position that is working out in your favor. I suspect that the month of April is going to be just as noisy as the month of March. With this in mind, we have a couple of levels to watch and any action between here and there will more likely than not be noise.
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