One day left in the 3rd quarter and equity markets are near their recent all-time highs. Since the June lows, the S&P 500 has chugged higher with several brief visits back to its 20 day SMA. And the pre-market action this last day looks like it may be headed for yet another visit.
That should not surprise anyone. Runs higher and then shallower pullbacks are indicative of a healthy market. But this pullback on this day shows another phenomenon. The 20 day SMA is also sitting right at 2900. A big round number. There is no magic in this number other than the fact that people like to peg their expectations and targets to big round numbers. No one ever says that their S&P 500 target is 2910.15. Am I right? It is 2800 or 2900 or 3000.
So as we run into the quarter end with the futures market pulling back it looks like 2900 is a reasonable target for the final print. there are economic reasons for it as well. A close at 2900 would make the biggest open interest in the options market (both sides) worthless. Options pinning is also ready to play a role.
Below 2901.52 would make for a negative month in September. That would satisfy the seasonality followers that see September as a weak month. So perhaps a positive close, over 2902 would satisfy the bulls and the options market makers while keeping the big round number fans in the close enough category.
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