Two key Fed days are coming within the next two weeks: the November 2nd FOMC rate hike decision, and the November 10th October CPI Report.
Average S&P 500 Reaction to FOMC and CPI in 2022
Average effect of the Fed on the stock market. Source: Market Rebellion
Both events have a habit of spooking the stock market, with an average S&P 500 1-day move of ±1.86% on Fed days in 2022. Those movements have been growing in size as we enter the latter half of the year (as shown in the graphic above).
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This week, with the S&P 500 sitting on a crucial battleground level ($3,900), the market could be in for another big move.
S&P 500 Loves the $3,900 Level
The SPY as a proxy for the S&P 500 and the most crucial level of 2022. Red arrows indicate points where the level has been resistance, green arrows indicate points where the level has been support. Source: TradingView, Market Rebellion
Between May of 2022 and present day, the $3,900 level in the SPX and the $390 level in the SPY has acted like a magnet. The market just can’t escape its pull. When a particular flat line acts as support (and resistance) so many times in a short period, it becomes a key area for technical traders to watch for. A powerful break above this $3,900 level could put the S&P 500 on the fast track to testing the next two levels of resistance (roughly at $410 and $430). On the other hand, the last time a strong rejection off the $3900 level occurred, it took the S&P 500 to new 52 week lows.
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The Bottom Line: Watch what happens on November 2nd for a heads-up on where the stock market is heading next. It’s okay to pay attention to what Jerome Powell says, but it’s probably more important to pay attention to what the stock market says.
Remember: Stay disciplined, and trade what the market is giving you, not what you think the market should give you.