Stock local bottom in for a while?
Updated
All 3 major US indices hit major key levels and bounced nicely. The S&P500 swept several lows and formed a nice bottom. It also hit the S3 Monthly pivot and has now reclaimed the S1 Yearly pivot, and is looking fairly strong. The Nasdaq 100 swept the November low, right before the huge rally begun, and partially filled a large gap on NDX/QQQ. The Russell 2000 hit the 2018-2020 highs, and like the Nasdaq, it essentially retraced the entire election/vaccine trade.
Based on all the above, the bottom could be in, especially as the SPX corrected by 21% and the other two by more than 30%. However there are many key resistances levels above, and it doesn't feel like we've seen capitulation yet. Not only that, but not all key areas have been hit. I could see the SPX getting to the Sep-Nov 2021 highs, while the NDX and RUT would fully fill the gap from the vaccine/election trade.
Essentially I'd like to see the SPX get properly oversold as so far it is simply as oversold as it was in Dec 2018, yet valuations are way more extreme and charts look a lot worse, as well as seeing the NDX & RUT hit their S3 Yearly Pivots and sweep a few more lows. For example the RUT has formed a double bottom right above the gap, and that's why I think we have at least one more push. Doesn't mean the market is going to melt down and that we'll get a huge bear market, but as the typical bear market for the S&P is about 30%, I'd like to see it at least get down there.
Until then though, I do believe the SPX could get up to 4300-4400. I believe a local bottom could be in and a 10% bear market rally is possible here. My target is the key breakdown zone at 4360 that was never retested, along with the triple top at 4300. Getting up the Yearly pivot before getting smacked down again is more likely in my opinion than going straight down from here. In my opinion people got extremely bearish, while the market got extremely oversold, hit major targets and at the same time inflation seems to have peaked.
Based on all the above, the bottom could be in, especially as the SPX corrected by 21% and the other two by more than 30%. However there are many key resistances levels above, and it doesn't feel like we've seen capitulation yet. Not only that, but not all key areas have been hit. I could see the SPX getting to the Sep-Nov 2021 highs, while the NDX and RUT would fully fill the gap from the vaccine/election trade.
Essentially I'd like to see the SPX get properly oversold as so far it is simply as oversold as it was in Dec 2018, yet valuations are way more extreme and charts look a lot worse, as well as seeing the NDX & RUT hit their S3 Yearly Pivots and sweep a few more lows. For example the RUT has formed a double bottom right above the gap, and that's why I think we have at least one more push. Doesn't mean the market is going to melt down and that we'll get a huge bear market, but as the typical bear market for the S&P is about 30%, I'd like to see it at least get down there.
Until then though, I do believe the SPX could get up to 4300-4400. I believe a local bottom could be in and a 10% bear market rally is possible here. My target is the key breakdown zone at 4360 that was never retested, along with the triple top at 4300. Getting up the Yearly pivot before getting smacked down again is more likely in my opinion than going straight down from here. In my opinion people got extremely bearish, while the market got extremely oversold, hit major targets and at the same time inflation seems to have peaked.
Note
When looking at RUA (Russell 3000), we can see how the top 3000 stocks in the USA also formed a perfect bottom. The market returned back to early 2021, swept all the bottoms, hit the S2 Yearly and S3 Monthly, and bottomed.
To me it looks more likely that the bottom will come lower, potentially around the Yearly S3 and the 2020 pre-Covid peak (30% lower), or at least down to the Sep-Nov 2020 highs. However in the short term, I still believe a rally higher is possible. Potentially up 10% from here
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