Is The Stock Market Bottoming? Or Is Another Crash Coming?

Is The Stock Market Bottoming? Or Is Another Crash Coming?
This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

It looks like a bottom (a temporary one at least) is in. Let’s go through the charts and discuss what technical hurdles the market needs to tackle for this bottom to hold.

First, we need to see the S&P have a daily close above its 10-day moving average (dma) which is the thin red line below. The 10dma has been acting as a point of significant resistance during this selloff. I suspect we’ll see the market close above this point today.

The next significant area of resistance is at the 200dma (blue line above). This level also happens to coincide with a number of weekly closes. If we’re going to see another selloff lower it’ll likely happen somewhere around this level, in the 2,750-70 range.

And then the final hurdle that the market needs to clear on its way to new highs is the 2,850 level. This is its 50dma (thick red line) which also happens to be right at its 2-year upward trendline.

The percent of stocks above their 50dma is triggering a buy signal due to oversold conditions.

And the percent of stocks above the 200dma (a longer-term indicator of oversold conditions) just touched the 25 level (black horizontal line below) that we wanted to see. This means the market is deeply oversold and now has the elasticity for a significant rally higher.

Sentiment, which has been stubbornly complacent during this selloff, has finally come down somewhat.

To learn more, make sure you watch the video above!

And as always, stay Fallible out there investors!

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***All content, opinions, and commentary by Fallible is intended for general information and educational purposes only, NOT INVESTMENT ADVICE.