The stock market needs to hold this line

A quick follow-up from my last observation when I said about the S&P 500;

"If it breaks below 3,900 and fills the gap below that, then we'll likely see more downside." 

The day after I wrote it, the S&P closed up sharply but has since traded back down with two significant distribution days, which was enough to erase the up-day. 

Now, the SPX is testing an important area, by my estimation, and I've highlighted the 3,900 level in yellow.

If the SPX fails to hold this level, then the market has pushed the stock index back down below the November 10th gap up on better-than-expected inflation news. 

I think it's meaningful if the broad stock index can't hold above the November 10th price action. 

We've had some positive economic news this week, but with a hawkish fed in tightening mode, positive economic data is negative for the stock market.  

Surprising improvement in Services business sentiment and a greater-than-expected increase in factory orders, along with last Friday's upside surprise from the November Payrolls report, suggests the Fed hasn't done enough to slow the pace of the US economy and inflation.

So, we're once again at an inflection point in the short-term stock market trend. 

Let's see how it all unfolds. 

Mike Shell is the Founder and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of ASYMMETRY® Managed Portfolios. Mike Shell and Shell Capital Management, LLC is a registered investment advisor focused on asymmetric risk-reward and absolute return strategies and provides investment advice and portfolio management only to clients with a signed and executed investment management agreement. The observations shared on this website are for general information only and should not be construed as investment advice to buy or sell any security. This information does not suggest in any way that any graph, chart, or formula offered can solely guide an investor as to which securities to buy or sell, or when to buy or sell them. Securities reflected are not intended to represent any client holdings or recommendations made by the firm. In the event any past specific recommendations are referred to inadvertently, a list of all recommendations made by the company within at least the prior one-year period may be furnished upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on the list. Any opinions expressed may change as subsequent conditions change. Please do not make any investment decisions based on such information, as it is not advice and is subject to change without notice. Investing involves risk, including the potential loss of principal an investor must be willing to bear. Past performance is no guarantee of future results. All information and data are deemed reliable but are not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise an implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. The views and opinions expressed in ASYMMETRY® Observations are those of the authors and do not necessarily reflect the position of Shell Capital Management, LLC. The use of this website is subject to its terms and conditions.