The stock market has hit an inflection point that could signal the next leg down before a major swing low. Investor sentiment has become increasingly bullish as the rally extended beyond its 200-week moving average, but this turning point may confirm a deeper retest ahead. In the near term, there are buying opportunities emerging.
For instance, there’s a test of the 20-day moving average off the back of yesterday’s distribution day. A bounce here could lead to a challenge of the 200-day moving averages, supported by net bullish technicals. The Russell 2000 is also presenting a scenario where it might soon be testing the convergence of the 20-day and 200-day moving averages, which could offer a bounce play opportunity.
Market bullishness at inflection point
Its technicals remain net positive. The Nasdaq has managed to maintain its gains, avoiding the losses experienced by the Russell 2000 and S&P 500.
Positive support tests in the Russell 2000 and S&P 500 could provide indicators for recovery, although the Nasdaq looks poised to potentially lead and challenge the 20,000 mark again. As we approach Friday, it’s crucial to consider the extent of losses this early fade could bring. Investor sentiment suggests that successful support tests in the S&P 500 or Russell 2000 may not occur, likely leading to further losses in the Nasdaq.
Nonetheless, these potential losses are anticipated to be part of the final leg down before a major swing low is established. Despite the current market fade, investors may find opportunities as the market seeks to establish a new support level for future gains.
