The question on everybody’s mind is whether we will have a retest. We are overbought enough to have a pullback starting this week. Our forecast has been for an especially strong summer rally this year and we are sticking with that, after a dip at least over the next two weeks. We still think Small Cap is a speculative buy.
We still think a retest is likely but note this almost always within four to six weeks after the first low. A successful retest means strong stocks won’t go down so we should be buying for models now, not waiting. TLT continues to rally off the bottom in the 85-area and is now testing some resistance in the 90-area. We continue to look for 92, and then 95.
There were some technical features of the advance that confirm our original view that a retest is likely. we should use declines to add to models. There is substantial risk of an advance, not a decline, in rates.
One question is whether Monday was the retest we are looking for, and to the best of our belief the answer is no. Realize that on a retest fewer stocks in your models should decline – buy the strongest ones, and don’t worry too much about the retest. We anticipate this process should take another few weeks.
The indicators still suggest this is a bottoming pattern and that a retest of the closing low on SPY is possible. We would like to see a down open on Monday, maybe another small down day, and then the rest of the week should be up.
Some sideways trading would be positive here, and within that context we could see a test of the 510-area on SPY. A slight down close on the week would set up a strong up week next week.
The situation is such that some more bouncing around is likely, and eventually a new CLOSING low. The word “Closing” is important, because the closing low is SPY 496.48 and not down in the low 480’s. A strong advance in rates is one of our biggest concerns. We would like to see USO trade above 70 to suggest a move to the 80’s is in the cards.
We still believe our 500 to 480-support area on SPY should hold, especially on a closing basis. The Put/Call number improved to 1.23, getting close to what we want to see, and suggesting some panic. A move below 274 on GLD would confirm a trend change.
The numbers for the downside that we published in our alert (500 to 485) are still operative. We also believe a V bottom is unlikely here – with the kind of momentum we’ve seen a divergence bottom/basing period makes more sense. Bonds could be volatile as equities sort themselves out. For those that are holding, we would sell both TLT and LQD if TLT can trade at 95 early Monday morning.
We have been expecting equities to rally after the tariffs are imposed and still expect this. TLT is rallying as well – it is a bit weaker than expected but still should hit at least 93 and likely 95, by May/June. Lower volatility and high dividend ETFs are trading near all-time highs in spite of the market decline. Watch gold here as some strange stuff could happen this month with regard to the physical commodity.
Put/Call hit its highest level on individual data points since March 13th, and before that January 10th, 2025. While we would like to see bigger numbers, this is a move in the right direction. We think equities are still in a bottoming process.
We have no changes to our forecast for a rally into the June timeframe. TLT is basically still holding the 90-area as the daily stochastic moves closer to oversold and a recycle.
We have no changes to our belief that the market is set up to rally into the summer months. Because of the increased spending from Germany, that Europe could be entering a new long-term bull market.
SPY is still stronger, per our Accumulation Models, suggesting the market should move away from secondary Tech. If readings on %Bears continue this way another week should give us close to 30 on this indicator – contrarian bullish, which is another support to our outlook.
So far, it looks as if our forecast/plan of an intermediate bottom in March is happening. Sentiment is improving, with several firms cutting upside targets, talk of recession, and a big MarketWatch headline suggesting there is more downside and not to buy anything.
Now it looks like the equity markets should rally tomorrow and then bounce around a bit before starting an advance, hopefully creating a bit more fear and consternation.
Stocks continued their decline last week and we have more bottoming signs in our indicators. We think the first-tier growth names will do well in a rally from this area, but that second tier growth names may not do as well.
We have been adding money slowly, and would continue to add money. GLD is above the 267 to 268 area where we suggested traders sell this. Investors, be on guard – this month could be the end of the advance in gold.
If the scenario we have been looking for works out, then this rally should be the strongest of 2025 and last through the summer. GLD is making a significant top in here, and defensive action should be taken. Short-term indicators suggest some rally is possible this week and traders should sell that rally, ideally around 267.
We would be adding money in here, looking to add more on confirmation of a low. The main thing for PLTR is that back above 90 closing basis would be a buy point.
