Despite pessimism, it’s early to call for a Technical bottom

Key Takeaways

  • Monday’s breakdown has taken SPX, QQQ and DJIA to lowest since at least a year
  • Microsoft’s breakdown of $270 a definite headwind for Equities given its representation
  • Sentiment has been bearish for a few weeks, yet no definite evidence of capitulation  

The relentless selloff has continued as this new week has gotten underway, and SPX has now officially broken February intra-day lows on a closing basis, while the DJIA has joined the SPX and QQQ in closing at the lowest levels in more than a year. While sentiment has turned bearish using some metrics, technical structure remains negative, and daily momentum gauges like RSI are not oversold. Bottom line, it’s early to expect a meaningful low. While trading lows might materialize sometime this week, a 100% equality price projection in the decline from late March peaks should allow prices to get down to at least 3950 without much trouble, with 3815 also having significance. My 2022 Outlook call of SPX-3815 into June before a meaningful bottom remains on track and, at present, it looks premature to expect any sort of long-lasting low until real capitulation gets underway. At present, this still looks early with the VIX under March highs, while inflows to speculative ETF’s like ProShares UltraPro QQQ dominated last week.

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