Yield curve inversions, slowing global growth, trade tensions, and more. Whatever the reason ascribed, this week’s latest sell-off in the market may have provided one of the most important ingredients to a stock market bottom: fear.
As the S&P 500 Index tumbled more than 6% in just two days, we saw elevated put/call ratios, increased volume, extremely negative breadth, and more that finally gave a “sell what you can” feel to the market. “It is important to remember that bottoming is a process, and to us, seeing these signs of fear while the S&P remained above the lows of this correction is an arrow in the quiver of the bulls,” noted LPL Chief Investment Strategist John Lynch.
Markets subsequently rallied to close out Thursday at the day’s highs, and now we may be forming a triple bottom around the 2640 level of the benchmark index as shown in the LPL Chart of the Day.
One final point regarding any “death crosses” that seem to fill the news: This indicator (where the 50-day moving average crosses below the 200 day) has historically signaled above-average returns in the short-term, so we would disregard those media headlines in search of clicks.
Look for more technical analysis insights in next Monday’s Weekly Market Commentary.
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