Well, it’s been a wild few weeks and a retest of last week’s lows appears underway. In last week’s note, I discussed the potential for an oversold bounce developing from support at 2855 on the S&P 500 index (SPX), coinciding with the 4Q19 lows and a 50% retracement of the 12/2018-02/ 2020 rally. One week later, the SPX is in the process of retesting that important support level.

I’d like to be able to say that a successful retest/bottom is taking place, but there is insufficient technical evidence. While my expectation is the SPX will attempt to establish a secondary low in the coming week, I think a break below 2855 is likely to see a further move down toward next support at the August 2019 lows of 2822.

At that point, the next important support band is the level between the June 2019 lows, 2728, and just below the 62% retracement, 2746. Lastly, the rising 200-week moving average, currently around 2633, remains an important long-term support level that has historically defined important cycle lows.

More importantly, the intermediate-term backdrop suggests markets are will remain volatile well into 2Q. Longer term, however, the weekly momentum indicators remain negative after peaking at overbought levels in early February and are unlikely to become o...

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