Market Pull Back - Caution?

Market Pull Back - Caution?

April 19, 2024

Key Takeaway

The market has defied most analysts this year (which is not uncommon); however, has it hit a short-term peak?  As of now, the market peaked at the beginning of April and seems to be in a minor, and possibly healthy, pull back. We all know that the market does not always go up, so when it does have a nice run, a pull back should not come as a surprise. 

A very natural support level, which could attract investors back to the table, is the peak established from the prior high which was set at the beginning of 2022 (see green dotted line with the orange circle). My two "go-to" indicators are confirming that the market is indeed in a small pull-back for the time being.  RSI has dropped below 50 (top chart), and MACD has just turned negative (bottom chart). This does not necessarily mean that the market will roll-over hard, but it does mean that the current environment requires caution.  Our plan is to identify and pay close attention to the various support levels, such as prior peaks, moving averages, Fibonacci levels, and up-trend channel supports. For long-term investors, it pays to stay the course, as we are very much entrenched in a long-term uptrend; however for short or mid-term investors, some caution might not be a bad idea, at least until our indicators flip back to flashing green. 

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