U.S. Major Indices: With February Lows Undercut, New Lows Beckon
2022.05.02 07:47
Friday saw the end of support from Februray and March swing lows as sellers closed the week in total control. We now have to consider the possibility of measured move lower. Some indices are closer to this target than others.
The nearest measured move target is the S&P. It’s target is 3,977 which is only one or two days worth of selling to get there; this level was formerly resistance in January 2021 and now has the potential to be support. On the weekly chart, momentum is not entirely oversold and ideally I would like to see it tag a level last seen in March 2020.
SPX Weekly Chart
The NASDAQ has long since kissed goodbye to 2021 support levels, and now has swing lows of summer 2020 for its measured move target of 10,820. Given the extent of these losses, the index has already reached a level of momentum beyond the oversold state of 2020 COVID lows. What we are seeing is a long needed counter move lower in the indices—something more substantial than the swift move down we saw when COVID first emerged in 2020.
COMPQ Weekly Chart
The Russell 2000 (via IWM) had been slowly building a solid base, and had managed a breakout before quickly reversing as a ‘bull trap’; ‘bull traps’ commonly return to support of the prior base—then break it—and this was no exception. In this case, the measured move target is down to January 2020 pre-COVID highs of $166 which would be an ideal buying point given the already oversold state of the index.
IWM Weekly Chart
On a positive note, investors should be buyers and not selling into fear when markets are trading at the levels they currently do now. Prices have a good chance of going lower, but there is already accumulation value to be had here—the key is spreading out the investment, perhaps over a period of six months. I have tracked sample trades here, but I would be expecting stop hits for each at this point. However, my ROTH investments continue to do well.
