BTIG Predicts Possible Retest of Long-Term Support Levels amid Market Sell-Off

Stock Market Outlook: Potential Tests of Long-term Support

In the wake of the stock market sell-off last Friday, experts like BTIG’s Jonathan Krinsky predict that a retest of long-term support levels could be imminent. On Friday, the Dow Jones Industrial Average dropped nearly 700 points, a loss of over 1.6%. This was largely spurred by a strong jobs report which triggered fears that the Federal Reserve might not cut rates as expected. The S & P 500 and Nasdaq Composite also experienced losses over 1.5%, plunging them into negative territory for the year and beneath their 50-day moving averages. Such a move often signals a potential for more downside in the near term.

Long-term Technical Indicators in the stock market

According to Krinsky, the 200-day moving average might also be up for a test later this quarter, even if a short-term bounce occurs. While this long-term technical indicator remains intact, a decline below it would suggest a troubling trend. The possible test of the 200-day moving average of the S & P 500 might occur, with Krinsky noting, “we continue to see ‘unfinished business’ lower with a possible 200 DMA test (5572) later this quarter”. A drop below 5,572 represents a more than 4% drop from Friday’s closing figures.

Rising Concerns in the Stock Market

Increasing treasury yields and weakening breadth are among the concerns shared by strategists like Javed Mirza of Raymond James, who also sees the potential for a significant pullback this quarter. Mirza advises investors to take a more defensive stance, particularly as market leaders show signs of stalling. Similarly, JC O’Hara of Roth Capital stresses the need for a balanced and cautious approach to stocks, despite the fact that “longer term trends are still intact at the index level”.