The bounce anticipated last weekend happened, and it vanished following the roadmap shared two weeks ago when the SPX reached the $5500 zone for the first time this year. The expectation for a short-lived bounce occurred, following the pathway charted on March 12th in a publication that analyzed the first stage of different bear markets. The results are remarkable, following the weakest pathway charted back then. 
A Key Element to Consider: Rapid Reversals
Last Monday, the market soared in a single day +1.76%, by Tuesday the bullish target had been reached, so the decline was technically following the pathway, but it was happening too fast. Rapid rejections are the inverse price action that you find in a bull market, when any pullback is rapidly bought. That is another reference to the change of character nowadays and is consistent with my documented expectations of a significant pullback, as posted at the end of 2024 and during all of February.
There are two notable factors affecting the market directly. The first one is the macro context, and in February, all the leading indicators analyzed pointed to an impact in the stock market. The yield curve un-inversion was just one of the first ones flagging warnings last year, but month by month six other indicators also raised warning signs.
The tariffs set by the U.S. government are accelerating the negative macro context, and the PCE reading on Friday above expectations is consistent with the warnings.
On the other hand, price action is falling from overheated conditions, potentially triggering bearish signals like studied last Wednesday in smartreversals.com, in a special edition analyzing what follows when there is a death cross based in a decade of data studied for SPX, NDX, IWM, AAPL, NVDA, and other essential securities.
Let’s begin with the technical analysis for 20+ charts that are constantly studied. You can find which ones are in bearish mode like most of the stocks, which ones are in bullish momentum like precious metals, and those consolidating like Bitcoin.
Semiconductors (SMH): The analogy drawn between the current AI sector and the 2000 dot-com bubble warrants examination. Notwithstanding potential overvaluation in semiconductor equities, these entities demonstrate robust financial statements and operational fundamentals, a stark contrast to the revenue-deficient websites of the 2000 era.
This publication utilizes the SMH ETF as a proxy for the semiconductor sector, which includes prominent stocks such as Nvidia, Taiwan Semiconductor (NYSE:TSM), Broadcom (NASDAQ:AVGO), and Qualcomm (NASDAQ:QCOM), as delineated in the accompanying table.
While elevated, the sector’s current average price-to-earnings ratio of 35 is significantly different from the unsustainable valuations around 200 observed during the 2000 Nasdaq peak.
What is happening in price action is painful, but a -78% decline as observed in the 2000s for Nasdaq is fundamentally improbable. For access to fundamental analysis for semiconductor companies like NVDA, AVGO, MU, INTL, TXN, and AMD, get access to the fundamental and macro library on my site.
Technically speaking, the series of lower highs for semiconductors is clear, as highlighted by the red curved arrow, and every top has been signaled by an indecision candle. The price is oversold already, and it is right on the lower edge of the volume shelf.
$231 as annual level, posted since January, has proven to be a major resistance during the last four weeks, today the candle breached the lower weekly Bollinger band that is widening.
Bearish continuation is expected if price continues below $218.5, targeting $204.6, where a corrective bounce is possible, if it recovers $218.5 (which is difficult, and another rejection could happen there), the bullish reversal target would be $226.
SPX: The week began with gains as anticipated last Saturday, when a bounce was deemed very likely with $5,777 as a target set in the same publication. Monday opened with a gap in the daily timeframe and, as also anticipated, the VIX could find support at two levels: 19 or 17.
The low for the volatility index (VIX) was precisely 16.97, coinciding perfectly with the moment the $5,777 target was achieved ($5,783 to be exact, just 6 points of distance), triggering a bearish price action. Today, the bearish engulfing candle suggests further negative continuation, closing with conviction at the week’s low. Before analyzing next week’s target, let’s examine the four events highlighted by the black arrows in the chart:
All of them point to a bearish candle that was followed by a bullish reversal.
- March 2023: On Monday, March 13th, the SPX opened in the red, printing a daily indecision candle that was followed by a bullish reversal.
- October 2023: On Monday, October 30th, the price opened in the green, considering that the previous candle breached the weekly Bollinger band (green line) and the weekly oscillator was oversold.
- April 2024: On Monday, April 22nd, the price opened in the green, after finding support in the 20 weekly average (blue line).
- September 2024: On Monday, September 6th, the price bounced after finding support again in the 20 weekly average.
The orange arrow highlights two elements: price action found support on Friday at the annual $5,584 level and the Bollinger band was breached like in October 2023. Does it open up a chance for a surprise bounce based on the weekly chart? probably, but the difference with all the previous events is that the lower Bollinger band has not been touched in the daily timeframe, and today that band is at $5,505.
Another difference today is the rejection at the 40 weekly average highlighted by the red arrow, which is a major bearish event considering that price has been below that purple line for three weeks already. All that said, there are small chances for a bounce, and if it happens, $5,779 will be the test for a sustained one (if even reached).
Conclusion: The setup suggests bearish continuation, with a small probability for a bounce once the short-term bearish target is reached as follows: If the SPX remains below $5,646.8, the immediate bearish target is $5,506.6 (Matching the lower Bollinger band). If there is a bounce at that level, or if the week opens in the green, a recovery above $5,646.8 could signal a bounce to $5721.1.
TLT: The indecision presented by bonds brings contradictory signs, considering price action showing indecision around the $90.7 level and finding rejection at the higher edge of the volume shelf. The setup still favors bulls considering caution. Bullish continuation is favored if $89.7 holds as support, targeting $90.8. A potential bearish reversal target is $89.1 if the central level mentioned is breached.
DXY: The bounce may be delayed considering the rejection at the 5 weekly average as it happened during a couple of weeks in September 2024. Price is oversold but as long as $105 is not recovered, the dollar index is in downtrend favoring stocks. Currently, $103 is is a potential destination zone. If $105 is recovered, a bounce to $106.8 would be in play.
GLD: The new Palantir on the block. There is always a bull market in some place, and precious metals, mainly gold is rallying with a solid distance from $271.5, price is overbought as highlighted, and the daily chart printed a doji star that is worth be mindful about, a gap fill to $282 is likely. Bullish continuation is favored if $281.9 holds as support, targeting $286.8. A potential bearish reversal target is $279.1 if the central $281.9 level is breached.
SLV: A new high seems imminent considering price action. Silver also suggests a retrace considering a dark cloud candle on the daily timeframe, but bullish continuation is favored if $30.8 holds as support, targeting $31.6. A potential bearish reversal target is $30.1 if the central level is breached.
MSTR: Impressive rejection at the 20 weekly average sending price back below the annual $305 level. Bullish gaps like the one on Monday during suspected bear markets are quickly filled (if the SPX doesn’t recover its 40MA quickly we are in a bear market). The landscape for MSTR changed, and the best possible case for Monday is a reversal candle bouncing from $280.38, the central monthly level. Anyway, bearish continuation is expected if the price stays below $307.4, with an immediate target of $271.2 (unless $280.3 comes to the rescue). A potential bullish reversal target is $325.6 if the key level is recovered.
NDX: The rejection at the 40 MA and closing below the annual level of $19,951 prints a bearish chart that suggests the $18,100 zone as a destination. Since this index is in usual synchrony with the SPX, the events mentioned above apply for this one as well, with the imperfections that bring higher volatility. That means the bounce in September didn’t happen at the 20MA like in SPX, but it was near the 40MA; at the same time, the NDX didn’t breach the 40MA in March 2023 as the SPX did. That said, the loss of the 40MA is negative.
Bearish continuation is anticipated if the price stays below $19,605, targeting $18,917.9 next week. A potential bullish reversal target is $19,968.5 if the central level is recovered.
DJI: Another index failing to recover the 40MA, and closing at the central annual level $46.3K. The oscillator is signaling a potential curl, and the lower edge of the volume shelf is the last line of defense in confluence with the level mentioned. Staying in a support zone does not guarantee a bounce, and price action shows conviction from the sellers. A bearish continuation is expected if the price continues below $41978.6, targeting $41135.3. A potential bullish reversal target is $42427.2 if the key level is recovered.
IWM: The volume gap proved its strength with Small Caps, see how the “blank” zone between the volume shelves sent back quickly the price to the lower shelf. Since the candle is a bearish engulfing one in the weekly, the best expectation for bulls is a small indecision candle next week.
The positive point for bulls is the lower Bollinger band standing very close to Friday’s close in the daily timeframe. I would say the bullish thesis for a short-term bounce is still live for Small Caps, but as I always highlight, a move in megacaps shakes the market in the same direction. Bearish continuation is favored if the price continues below $203, with an immediate target of $196.8. A potential bullish reversal target is $206.7 if the key level is recovered.
The same in-depth charts and analysis describing the current setups, with price targets and key support and resistance levels for PLTR, GOOG, AAPL, NVDA, META, MSFT, TSLA, AMZN, and BTC; can be found in smartreversals.com. If you actively invest or trade any of these securities, this publication is essential for making informed investment decisions. This market research and educational content is not intended to be investment advice.