Stock Markets Analysis & Opinion

Should We Be Worried About This Test of Recent Lows?


S&P 500 Index Daily Chart

The S&P 500 continues probing recent lows and is testing the 200dma.

Headlines haven’t changed in a meaningful way since January, but the market’s mood couldn’t be more different. The half-full outlook that 2023 started with has given way to this recent wave of hand-wringing. Is this the result of a fundamental change in the market’s outlook, or just part of the market’s routine mood swings? Good question.

The market rallied 700 points from the October lows, so this 250-point retreat from recent highs shouldn’t surprise anyone. Two steps forward, one step back has always been the name of the game, and at this point, this latest slip from recent highs doesn’t look any more severe than one of those routine steps back.

But as long as we continue testing the lows, we are always at risk of making new lows. But as long as most owners keep shrugging and holding, any selling will be contained. If this crop of owners was skittish and prone to impulsive selling, we would have seen the bottom fall out a long time ago.

I’d love to see a buyable rebound from these levels, but the market is in charge and it dictates the pace. If we need to consolidate for a few more weeks, then I have no choice but to keep waiting and watching.

I will be there to buy the next bounce and the one after that. But because I know this is a low-energy environment, I will be quick to take profits because it won’t be long before those profits are gone.

A bigger directional move is coming, but it is still a way out. Until then, keep taking profits early and often.


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