The S&P 500 on the cusp of breaking out from its bearish short-term trend. However, an upside resolution failed last Wednesday. Equities sold off sharply instead. Therefore, the risk of a retest of the Jan. 24 lows persists.
Yet, technical evidence of a local bottom continues accumulating. We have witnessed a series of higher highs and higher lows since Jan. 24. Moreover, momentum diverged and liquidity dried up. Meanwhile, the major equity indices overseas did not confirm the recent weakness in US stocks.
Sentiment is at or near capitulation as retail and professional investors had a rough start. Concentrated retail investors’ portfolios were destroyed. Popular stocks like Shopify, Facebook, Paypal, and Square have already sold off by more than 60%! Professional investors also had a tough start as stocks and bonds corrected. The typical 60/40 portfolio had the worst start of the past 25 years. The negative sentiment readings are not surprising even if the S&P500 is only 9% down from its all-time high.
Nonetheless, macroeconomic, behavioral, and technical evidence signals: This is most likely an attractive buying opportunity.
Yet, technical evidence of a local bottom continues accumulating. We have witnessed a series of higher highs and higher lows since Jan. 24. Moreover, momentum diverged and liquidity dried up. Meanwhile, the major equity indices overseas did not confirm the recent weakness in US stocks.
Sentiment is at or near capitulation as retail and professional investors had a rough start. Concentrated retail investors’ portfolios were destroyed. Popular stocks like Shopify, Facebook, Paypal, and Square have already sold off by more than 60%! Professional investors also had a tough start as stocks and bonds corrected. The typical 60/40 portfolio had the worst start of the past 25 years. The negative sentiment readings are not surprising even if the S&P500 is only 9% down from its all-time high.
Nonetheless, macroeconomic, behavioral, and technical evidence signals: This is most likely an attractive buying opportunity.