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Jonathan Krinsky, BTIG’s Chief Market Technician, believes that fears about the long-term implications of current macro headwinds on markets are justified. More recently, Krinsky warned the firm’s clients that the S&P 500 is poised to drop below 3900 after the index completed a head-and-shoulders pattern.
As the S&P 500 trades below 3700 in pre-open trading on Monday, Krinsky says “we are much closer to a tradable bottom than we were at 3,900.”
“While there will be some talk of a double bottom at the June lows, an undercut that gets closer to the 200- Week Moving Average makes sense to us,” Krinsky wrote in a note.
Below the 200-WMA, which comes close to 3590 this week, the next big support for the S&P 500 is around 3400, or pre-COVID highs. The “tradeable bottom” could be a result of some metrics showing early evidence of capitulation, Krinsky added.
“One of the metrics lacking capitulation was NYSE downside volume as a percentage of total volume. On a 20-day basis, it is now above 60% which is the start of the capitulation threshold.”
For equities to bottom, Krinsky once again warned that the U.S. dollar needs to “at least pause.”
