S&P 500: Tuesday’s Pullback Still Has Room to Run
2023.06.21 04:27
S&P 500 Index Daily Chart
The fell nearly 1% in early trade Tuesday as second thoughts came roaring back following last week’s strong surge higher.
The index slipped under 4,400 at the open and it wasn’t able to reclaim this psychologically significant level despite a nice midday bounce.
This is a tipping point. Either the index gets back above 4,400, or it doesn’t. If we get turned back by this level Wednesday, the selling will likely continue for a few more days.
On the other hand, if the index closes decisively above 4,400 Wednesday afternoon, then the worst of the selling is already behind us and higher prices are coming our way.
My intuition and experience tells me the selling still has a way to go before it is finished. The market loves symmetry, and big runs like we experienced over the last few weeks are always followed by similarly enthusiastic step-backs.
At this point, this violation of 4,400 is guilty until proven innocent. If we can’t get back above 4,400 Wednesday, position yourself for more selling. The most aggressive can keep holding their shorts with stops near Friday’s close.
For everyone else, keep waiting and watching for the real bounce because Tuesday afternoon probably wasn’t it.
