Market Confirms New Technical Level

Bears in control as S&P breaks through price floor; Dow Jones next?

In my May 1st newsletter, Stocks Fail at Key Support Levels, I noted that the NASDAQ had broken key support at around 12,500, and that this could drag the market lower.

Since then, we’ve seen the S&P break through the price floor at 4,200.

The Dow is currently sitting right at support of ~32,300. A slice through this level confirms a leg lower.

The NASDAQ, well, you know what’s happening.

That said, now we look to these same levels as resistance. As price falls through support, that level becomes future resistance, so we should expect selling pressure on any bounce.

Lately, we’ve seen multiple failed candlestick signals, although this suggests a bottom is near. The economy is strong, and Fed officials have been discussing publicly that inflation has likely peaked.

Fear continues to peak but this new technical level also implies one last leg lower before better days.

In fact, we saw a major intraday reversal on the VIX, which suggests now is a great time to buy the dip.

What to watch for this week

As always, I am watching closely for a candlestick reversal + any good news to support bulls. Last week’s Fed announcement was a major sentiment shift, but not enough to dissipate selling pressure.

Final Note: Buy when there is fear

If you buy now, and the market slides, stomach the loss. Don’t sell. You will not regret it when the stock market catches up to fundamentals, which remain strong.

I’m headed off to my honeymoon tomorrow, but still plan to follow charts (chart watching NEVER stops for me).

I’ll also drop a newsletter or two if price action warrants it, as this doesn’t feel like work for me.

Happy Trading 😊