Key Takeaway
As the S&P 500 continues its sell-off, this will eventually lead to a very good opportunity for patient investors to pick up some high quality stocks at steep bargains. However timing those bargains can be challenging. Currently the index is registering extreme oversold conditions as measured by the RSI and MACD indicators, meaning we're due for a bounce soon. In addition, the orange dotted line illustrates that if it's going to bounce, now would be a good time to do so. We're not calling a bottom by any means; however, we do anticipate buyers to come back in soon given the oversold setting. In order for the market to find a bottom, we want to see an eventual bounce lead to higher-highs and higher-lows.
If a bounce happens above the blue dashed line, we anticipate that the market would come back up to test the green dashed line, where short term traders may apply further selling pressure. Should the market break above and hold the green dashed line, that would be very constructive and signal an end; however, if the market drops below the blue dashed line, it would tell us the market has not found a bottom quite yet. We are prepared for either direction. Should the market breakdown, we will continue to make strategic exits and when conditions signal a buying opportunity, we've got our shopping list ready!
