Alright folks, let’s be real. We just witnessed the ugliest four-day plunge in the US stock market in five years. And believe me, the pain isn’t over yet. Everybody and their mother is scrambling to call a bottom, but the charts are screaming caution.
We’re firmly in oversold territory – the worst since the height of the pandemic. That briefly sparked a rally on Tuesday, briefly lifting the S&P 500, but it was promptly crushed by escalating trade tensions. A classic bear market trap, if you ask me. Now, traders are glued to their screens, desperately seeking guidance from technical analysis.
There are two crucial support levels right now. The first is 4910, roughly 20% below February’s peak. It held firm on Tuesday, managing a remarkable reversal in the final seven minutes of trading, reclaiming nearly half of the day’s losses. That’s a sign of buyers stepping in, but it isn’t enough to give a clear signal.
Fundstrat’s Mark Newton is laying it bare: 4835 – Monday’s intraday low – is the real psychological barrier. Breach that, and we’re looking at serious acceleration to the downside. “It’s hard to trust any bounce,” Newton bluntly states. “We’re approaching a bottom after massive overselling, but we haven’t seen the ultimate low yet. There’s further downside to go.” The looming question of tariffs hangs over everything, naturally.
Let’s break down some key concepts for those newer to the game:
Oversold Conditions: When an asset’s price has fallen rapidly over a short period, it’s considered ‘oversold.’ This often can lead to a ‘bounce’ as bargain hunters step in, but it doesn’t guarantee it.
Support Levels: These are price points where a stock or index has historically found buying interest, preventing further declines. Think of it as a floor.
Psychological Barriers: Whole numbers often act as psychological support or resistance levels. Traders tend to react to these levels due to their perceived significance.
Bear Market Traps: False rallies in a downtrend that lure investors into buying before the market resumes its decline. They’re ruthless, and they happen.
Don’t get cute out there. This is a market demanding respect. Be patient, understand your risk tolerance, and don’t chase rallies until we see real confirmation.
