Panic Buying Achieved, Waiting for More Confirmation of a Bottom

While panic selling has occurred during a few sessions over the past month (back-to-back 80%+ NYSE downside volume days, and two other 90%+ downside volume days), we maintained that buying demand, or panic buying, was needed before we could signal that a bottom had been made. We finally saw panic buying last Friday in the form of 92% upside volume on the NYSE. There is hope that this panic buying could signal that a major bottom is in place, but we still need to see more confirmation before declaring that the low is in. Additionally, if last week’s low of 3858 on the S&P 500 does not hold, then all bets are off and we would go back to a bearish outlook.

  • Waiting for Confirmation. A 90%+ NYSE upside volume day was one of three things we wanted to see in order to have confidence that the bottom is in. The other two that we have yet to see are (1) bullish price inflections on the major averages, and (2) steep RS uptrend violations on the Staples (XLP) and Utilities (XLU) Sectors. We are watching the Nasdaq 100 (QQQ); a break above the 6-week downtrend (currently $314-$315) would indicate a meaningful bounce and potential major bottom… see chart below.
  • US Dollar, 10-Year Treasury Yield, High Yield Spreads. The perpetually strong US dollar (DXY), rapidly rising Treasury yields, and widening high yield spreads have been major risk-off signals for global equities.
  • Big Picture Trends. The Russell 2000 (IWM) has pulled back to 4-year base support at $170, a critical line in the sand moving forward. The Nasdaq 100 (QQQ) is attempting to hold at $297, an important level from 2020-2021. Value displays a major long-term reversal; remain overweight value relative to growth. ARKK is testing long-term support at $35. Bitcoin and Ethereum are testing key supports as well, at 29,000 and 1700, respectively… see charts below 
QQQ

Source:FactSet

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