Technicals are flashing green. Stocks should be higher a year
from now, but we are not out of the woods yet. The V-Bottom/Zweig Breadth Thrust
Scenario has a few hurdles to clear. The extreme volatility spike pushing VIX above
50 and then retreating below 30 is also encouraging. These abrupt changes in
volatility and market breadth have a solid history of calling market bottoms. While
these technical developments are quite constructive the nature of this decline
and our other seasonal, post-election year and chart readings are keeping us
skeptical.
S&P 500 is barely back above the 5500-resistance level.
This is the bottom of that failed W-1-2-3 swing bottom at the beginning of
April. It is also in line with the bottom of the gap from the April 2 tariff
announcement to the open the next day on April 3. If we can clear this level
that would be constructive and suggest this relief rally can continue. But
until we can take back the declining 50-day moving average, the 200-day moving
average and the election gap (orange circle) the market is likely to remain
choppy through the summer.
