The great start of the new year shows that market optimism will stay with us in 2018. As we mentioned in an earlier post the uptrend could continue in spite of the long bull market and high stock valuations. Inflation is still muted in the US and Europe, so money – the fuel of stock markets – is still cheap. The growing economy and higher profits also justifies the rally. Until either inflation ticks up or the growth of the real economy slows down prices could continue to go higher.
The new year was very happy so far for investors, but how will it continue?
The S&P 500 index kicked off the year very strongly. This shows that during the portfolio rearrangements which is made by many institutional investor at the beginning of the year even more was invested in stocks. This means that the year could continue to be profitable if fundamentals does not change.
The road up, however, is not straight. There could be some serious corrections along the way. In case you are an active trader you should know at what price level the next pullback may come. Forex robot strategies may help you to find trend turns on even shorter time frames. Let’s see, however, where are the important resistance levels on the four-hour time frame?
Using the Fibonacci expansion tool on the S&P 500 index chart one can find out that the next important resistance level is at 2757 points. In case the index would go above that level it could rise until 2805 without any serious correction (see on the graph).