March Madness

As if on cue, the S&P 500 peaked on March 1st, and spent the entire month stair-stepping downwards gradually, as is most clearly evident on the 30 minute chart below. The mild pullback was certainly overdue, as the torrid rally in February had doubtless gotten ahead of itself.

S&P 500, 30 minute bars

There is no question that political consideration have played a large part along side the economic ones. The pullback coincided with increasing political tribulations for the Trump administration, and growing doubt regarding the likelihood of key pieces of the Trump agenda coming to fruition. So it makes sense that some of the rosy optimism the indices had already priced in would be duly re-priced.

Looked at from the perspective of the daily chart, however, its clear that the March pullback is just that, a relatively small pullback within the context of a much larger and more well established bull market that is still in full swing. The S&P 500 has multiple levels of support below current levels, including 2340 and 2300. However, should the pullback accelerate, the next most viable support falls just above 2200, a significant gap down.

S&P 500, daily bars

However, should we revisit the 2200 level, there would be plenty of technical justification for going long. Strong very long term trend support at these levels make it a high conviction entry point to buy.

While there is a possibility we may simply move higher from these levels, but there is no shortage of risk above 2340; the market is more than fully priced, especially considering slowing corporate top line growth and growing geopolitical tensions. Caution and tight stops are warranted here for long positions, still favored before the beginning of the seasonally weak period beginning May-June.

Best of luck out there.

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