Need to Know: As storm clouds gather over bond market, watch this level on the S&P 500

by | Oct 4, 2023 | Stock Market

While you were sleeping, the yield on the 30-year Treasury yield briefly broke the 5% level earlier on Wednesday. Bond chaos, to be sure, is not through with this market yet. And big investing names are ringing alarm bells:

@TruthGundlach @real_bill_gross

As the stock market goes along for a choppy ride, chartists are keeping close watch on an important level for the S&P 500, the subject of our call of the day.

“The 4,200 mark is crucial,” says Michael Kramer, Mott Capital Management founder. “Not only is it where the 200-day moving average [DMA] resides, but dropping below 4,200 also means the S&P 500 no longer boasts a 20% gain from the October 2022 lows.” The S&P 500
SPX
closed at 4,229.45 on Tuesday, a 1.37% drop.

TradingView/Mott Capital

“It’s worth considering how many investors might grow anxious if the 200-day moving average is breached and the index is no longer in a bull market,” Kramer told clients in a note. Also read: Stock-market rout puts all eyes on 4,200 level for S&P 500 The 200-DMA is considered a key indicator used by many chartists to determine long-term trends. After Tuesday’s selloff, the S&P 500 is still 21% above its October intraday low.  The market would have to fall 20% from its July 31 high to exit its bull market. “4200 is a big technical level and a very big psychological level, and if that breaks, I would think things get worse. Obviously, if you get weak job data on Friday and rates collapse, stocks will snap back. So suddenly, Friday’s job report just became a whole lot more important,” said Kramer. A stock market commentator who goes by Heisenberg (@Mr_Derivatives) has been discussing in recent weeks a pivotal moment facing the S&P 500. He’s optimistic., expecting a visit to 4,200 sooner than later, perhaps an “overshoot” to 4,185 to 4,190, and a “decently strong rally” from there out.

@Mr_Derivatives

Read: The S&P 500 is brushing up against ‘the mother of all trend lines.’ Meanwhile, Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services, smells opportunity with the stock market now at its most oversold since autumn 2022 as that 4,200 support level nears. He also thinks a temporary dip below that number is likely, given so many are watching it. The good news? “The percentage of stocks within the S&P 500 trading above their 50-day moving average is now below the 20% threshold considered oversold and sits at 15% currently,” he tells clients. “This suggests indiscriminate selling and is a level from which markets tend to bounce, at least in stronger markets,” though that will depend on yields cooling off and coming earnings season, he says. But investors below benchmark equity targets could realize an opportunity to “lean into equities and bring weightings closer toward neutral,” Lerner adds.The markets

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resides, but dropping below 4,200 also means the S&P 500 no longer boasts a 20% gain from the October 2022 lows.” The S&P 500
SPX
closed at 4,229.45 on Tuesday, a 1.37% drop.

TradingView/Mott Capital

“It’s worth considering how many investors might grow anxious if the 200-day moving average is breached and the index is no longer in a bull market,” Kramer told clients in a note. Also read: Stock-market rout puts all eyes on 4,200 level for S&P 500 The 200-DMA is considered a key indicator used by many chartists to determine long-term trends. After Tuesday’s selloff, the S&P 500 is still 21% above its October intraday low.  The market would have to fall 20% from its July 31 high to exit its bull market. “4200 is a big technical level and a very big psychological level, and if that breaks, I would think things get worse. Obviously, if you get weak job data on Friday and rates collapse, stocks will snap back. So suddenly, Friday’s job report just became a whole lot more important,” said Kramer. A stock market commentator who goes by Heisenberg (@Mr_Derivatives) has been discussing in recent weeks a pivotal moment facing the S&P 500. He’s optimistic., expecting a visit to 4,200 sooner than later, perhaps an “overshoot” to 4,185 to 4,190, and a “decently strong rally” from there out.

@Mr_Derivatives

Read: The S&P 500 is brushing up against ‘the mother of all trend lines.’ Meanwhile, Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services, smells opportunity with the stock market now at its most oversold since autumn 2022 as that 4,200 support level nears. He also thinks a temporary dip below that number is likely, given so many are watching it. The good news? “The percentage of stocks within the S&P 500 trading above their 50-day moving average is now below the 20% threshold considered oversold and sits at 15% currently,” he tells clients. “This suggests indiscriminate selling and is a level from which markets tend to bounce, at least in stronger markets,” though that will depend on yields cooling off and coming earnings season, he says. But investors below benchmark equity targets could realize an opportunity to “lean into equities and bring weightings closer toward neutral,” Lerner adds.The markets

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