“Death Crosses” typically don’t live up to the hype

Markets have begun the process of bottoming out and have carved out the first meaningful move off the lows since late last week on above-average breadth data. Overall, it’s thought that a rebound in Equities might help to cure some of the poor sentiment readings at a time when the “hard” economic data has failed to show much deterioration. Technically speaking, the rebound in Technology, along with large-cap Financials and Discretionary in recent days, is encouraging, and it looks doubtful that SPX will require any movement under 5600 and should begin to turn back higher into next week.  As discussed in previous days, the combination of sentiment data turning fearful followed by an above-average surge off last week’s lows looks bullish for Equities in the months ahead.  Overall, it looks right to position long with movement above 5703 on a close, leading to a meaningful rally back to new all-time highs. The downside should be limited to roughly 3%, while the upside back to new all-time highs should get underway to carry SPX up more than 9% initially.

(My comments yesterday referenced the 50-day moving average for SPX, which were intended to mean the 5-day moving average (SPX currently sits near its 50-week moving average). Sorry for the confusion.)

As shown below on hourly charts, SPX has been rather choppy in recent days following its initial surge off the lows late last week to near 5700.   Friday’s expiration proved to be a non-event for price action, though some late buying helped SPX finish mildly positive on the day.

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