It’s still a little too early to say, but the bounce is in play and "long" is the place to be. There is a huge amount of overhead resistance and the risk:reward remains tight with moves back to Thursday’s lows well within expectations.
For the S&P 500, I would be looking for a rally back to test the 200-day MA, or a fast-falling 20-day MA, whichever is the lowest. Real supply won’t kick in until 5,700 is tested, and maybe it will have the juice to get to 5,775 before volume selling makes its presence felt. As the index makes this move I expect to see a decent On-Balance-Volume ’buy’ signal, alongside what will be a weak MACD ’buy’; other technicals are likely to remain bearish.
The risk:reward for longs in the Russell 2000 (IWM) is perhaps a little more attractive with room to maneuver to $215 before supply may become a concern.
It’s closer to a weak MACD ’buy’ than the S&P 500, but other technicals are far away from turning bullish, with On-Balance-Volume have been particularly hit hard since the peak in February.
The Nasdaq sits in a similar predictament as the S&P 500. I kind-of like the congestion between 17,250 and 17,750 - it will help strengthen the swing low and if bears are able to do so, a push below 17,250 will likely see a nice spike low as stops get whipped out; sticking a few GTC buy orders between 17,000 and 17,250 could offer some nice value. Technicals are net bearish with a fairly stable On-Balance-Volume likely to generate the first ’buy’ signal.
The uptick helps the pending rally in the Nasdaq in the Percentage of Nasdaq Stocks Above their 50-day MA.
Bitcoin is interesting as it has reached the inflection point I am expecting the indices to hit later this week or early next week. Note how it made a neat bounce off the measured move target lower, but now finds itself in a struggle at converged 20-day and 200-day MAs. The easy outcome is a return lower, but if it breaks through the MAs, look for a solid white candlestick as caught-short shorts and eager longs jump on the trade. We do have a weak ’buy’ signal in the MACD.
As a final chart, I will leave you with this one of the AAII sentiment and the relationship between S&P 500 and its 200-day MA; are we in a 2022-24 phase decline?
While my outlook is not as bullish as JC Parets, I do think investors need to be in accumulation mode with the best value coming in September/October of this year. However, if markets rally from here to new all-time highs, then that prognosis goes out the window; hence, keep a toe in the market when weakness like now presents itself.