Conclusion, Investment Implications, Strategy

The S&P 500’s (SPX) wild day today appears to be due to the benchmark index’s test of major underlying support at 5773 to 5726.  This level represents an opportunity for investors to “buy the dip” at an obvious major support level, which puts risk/reward decidedly in their favor.  Today’s bullish bounce aside, how the index responds from here will likely indicate the direction of the US broad market’s next sustained Strategic one to several quarter trend.

 

The benchmark S&P 500 (SPX) opened 38 points or 0.7% lower today, collapsed to as low as 117 points or 2.0% lower by midday, and now — about an hour before the NYSE close — is only 13 points or 0.2% lower on the session.  Why did this happen?  What does it mean?

The adjacent chart shows what happened today is that SPX tested major underlying support at 5773 to 5726, which represents the Jan 13th benchmark low and the 200-day moving average, the latter a widely-watched major trend proxy that the index has been trading above since November 2023.

This support area is, from a risk/reward standpoint, an exceptional place for investors to “buy the dip” in anticipation of the current major uptrend resuming.  It would actually be more surprising to see SPX collapse below 5726 without a rebound first because the risk/reward opportunity is so good here.  The more important question is: can today’s rebound hold?

If today’s major bullish reversal from 5726 holds, it could very well become the springboard for the US broad market’s next significant leg higher.  If this rebound fails, however, it would indicate a major bearish trend change and would warn of a much deeper and more sustained US broad market decline.  

Primary Tactical Resistance is 1.0% to 2.6% above the market at SPX 5895 to 5990 and represents the October 2023 uptrend line, the Feb 3rd benchmark low, and the 50-day MA (minor trend proxy).  If today’s bullish reversal was just a knee-jerk reaction to an obvious place to “buy the dip” and no more than that, then today’s rebound should fail at or below SPX 5895 to 5990.  A sustained rise back above 5990, however, would indicate the current 2023 major US broad market uptrend is still intact and is resuming.