The S&P 500 Draw Down to Date (-12.08%) Meets the 200ma Weekly – UPDATE: DOW 1000 Point Surge
The S&P 500 has retraced all of 2018 (-12.08%) and a portion on 2017 gains while meeting the 200ma weekly moving average (2348.14). This pullback, while not completely unexpected did achieve the maximum drawdown targets of (-20%). This represents a 50% (+/-) Fibonacci retracement from the previous 200ma touch in February 2016. Chart below. UPDATE: Confirmed buying at key moving average. Higher lows need to hold.
S&P 500 – What Next?
We need to see a close above Monday’s price action, then a close above the previous weekly candle to begin positioning for a sustained bounce. 260.00 (+/-) is overhead resistance on the weekly chart below. RSI is oversold and volume the week before the holiday break reached capitulation levels. UPDATE: Check
Overhead resistance levels 2775.00 (+/-).
Words like “opportunity” are beginning to be heard on the financial media by prominent hedge fund managers, i.e. David Tepper.
Tepper mentioned buying stocks in the midst of the holiday selloff. The hedge fund manager implied that he saw an opportunity, so he began “nibbling,” while the indices dropped towards 20-month lows. Tepper remarked that the market “had a pretty good move” while thinking “it was too much of a move.”
Stocks Being Bought
We ran a few scans last night and were pleasantly surprised to see there were many stocks showing evidence of “opportunistic” buying.
This relative strength scan produced potential candidates and stocks like Spectrum Pharmaceuticals (SPPI). The two-day reversal starting on Friday exhibited price action we need to see before assuming a sustainable bounce might hold. SPPI closed above last weeks price action on above-average volume. Look for a follow-through today. UPDATE: Check
Scan Results
Breadth – Relative Strength
Breadth Thrusts were evident in all indices as stocks were bought by institutional investors. Extreme conditions below (-30%) gave us a heads up signal. We can also use this new found buying opportunity to sell laggards into strength. UPDATE: Check
Just a reminder; we are on vacation for the remainder of the week. That said, I will be in the chatroom periodically today.
Gold remains in an uptrend, and bullish.
Join us after the holiday for our LIVESTREAM broadcasts during market hours. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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