On the downside, if we break below the 50-day EMA and then of course the 3900 level, I think the market will break. The SandP 500 rose slightly during Thursday’s trading, but appears to be struggling to hold. There is a lot of noise in the market right above as we form a larger „expanding wedge”. The 200-day EMA is also above the 000 level, so I think it’s probably only a matter of time before we see signs of exhaustion on an even bigger move that we can short. Advertisement Want to test your skills? Open MT Free Demo Now! START On the downside, if we were to break below the 50 day EMA and then of course the 3900 level, I think the market would break. We’ve been grinding higher for a while, but it’s also worth noting that we’ve seen rallies like this before in the context of „The Fed’s Gonna Save It All.” Of course it isn’t, so it will be interesting to see how it plays out. Waiting for CPI numbers Remember that the CPI numbers are in the Friday session and have a lot to do with what people see the Fed doing in the near term. If these inflation numbers are hotter than expected, it would be a very ugly turn for the stock market. If it’s hotter than expected, it could indicate that the stock market needs to re-evaluate itself. On the other hand, if the CPI is lower than expected, I expect Wall Street to celebrate because soon it makes the idea of inflation irrelevant. There is now an almost frightening consensus that inflation has peaked, and perhaps it has. However, the Fed will remain tight for a lot longer than most people think, so it’s probably only a matter of time before I have to set prices in a real recession. It will be interesting to see how that plays out, but I think in the short term we’ll probably continue in the general area we’ve been in the last couple of weeks. Longer term, I think we will have an interesting story in January as traders return from vacation and liquidity returns to normal.