Market Overview

Will Traders Be Cautious Ahead Of The Holiday Weekend?

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Will Traders Be Cautious Ahead Of The Holiday Weekend?
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The premarket rally in Friday's session to new all-time highs in the S&P 500 index futures, reaching 2003.75, has set the stage for a potential key reversal in the market. In other words, prices hit a new high and then close near the previous day's lows. So far in Friday's session, a new high has been made high, but it remains to be seen if the index closes at or near Thursday's low (1,987.50).

Key Reversal

Since many technicians follow this technical indicator, it is crucial for the index to maintain above 1,987.50. If not, there may be a rash of selling near the close that could very well follow through to Sunday night.

Related Link: A Technical Look At Berkshire Hathaway's Recent Sell-Off

Keep in mind, while many of us are celebrating the long weekend at barbeques, the index will reopen at 6 p.m. Sunday night and remain open until 1 p.m. Monday. There will be a trading halt until 6 p.m. Monday, and the index will resume its normal schedule, finally ending Tuesday's session at 5:15 p.m.

Geopolitical Tensions

There are other factors besides the potential key reversal that may have investors taking a cautious stance over the long weekend. First of all, the ongoing saga between Ukraine and Russia could escalate into a war. It might be advantageous for Putin to gets things started while U.S. investors will be unable to react to the event in the marketplace.

Along these lines, things are heating up on the terrorism front. Hours ago. the U.K. raised its terrorism threat from “substantial” to “severe.” This news, which hit the wires around 9 a.m., had a slightly negative effect until British Prime Minister David Cameron took the podium around 9:50 a.m. to discuss the threat in more detail. Shortly after, the index declined to 1992.25 but has rebounded to the 1997.00 level.

Also, the month of September brings back memories of September 11, 2001. Of course, U.S. military forces are on high alert at this time and have been able to prevent any similar attacks on or around that day successfully for the last 12 years.

Month-End Profit Taking

Another reason for some selling pressure on today's market is that this marks the month's end for fund managers. In what historically has been a weak month for the market, August has produced a surprisingly rally. Perhaps money managers that were lagging the major benchmarks will take the opportunity to take some profits to make the full-year performance more palpable.

Rallies Into Holiday Weekends This Summer

Finally, the market has displayed an identifiable trading pattern leading into the summer holidays. The rally into Memorial Day had strong follow through all the way to the Fourth of July. That rally lingered for a few more weeks but ultimately set the stage for the late July and early August swoon that brought the index to 1,900 from 1,890.25.

Now that the index has rallied back to new all-time highs ahead of the Labor Day weekend, it will be interesting to see if another reversal takes place or the market continues to soar into the stratosphere.

If the key reversal does not come to fruition, investors may want to pay close attention to the all-time closing high in the index (1.998.50), especially since the index has posted three other closes, and possibly four, in that same area. A close above that key level and a quiet weekend on the geopolitical front may just be the recipe for the bull market to continue on its merry way.

Posted-In: Futures Technicals Movers & Shakers Intraday Update Markets Trading Ideas General Best of Benzinga

 

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