When Will the S&P 500 Bounce? Van Halen Might Have the Answer
Tariffs have created an Eruption of selling, but when will stocks Jump? Let's listen to Eddie.
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To say that Thursday was a rough day for the markets is an understatement. The S&P 500 lost 4.84%, and the Nasdaq Composite fell by nearly 6%.
One positive sign was a distinct lack of panic on the part of traders. This was reflected in the day's price action, as markets didn’t sway wildly. Instead, stocks dropped sharply at the opening bell, and then fluctuated in an orderly fashion.
On the negative side, while volume climbed, we didn’t see the type of increase in turnover that might signal capitulation.
Another negative was the fact that stocks closed near their lows. That could be a sign that a continuation of Thursday’s move is in the cards.
The question is, how much worse can things get before they get better? At this point, it’s not hard to envision the S&P 500 falling to 5150.
In California, 5150 is a code for a 72-hour involuntary confinement. It’s also the name of the late Eddie Van Halen’s recording studio, as well as the title of an album by Mr. Van Halen’s namesake band.
Why might 5150 be a significant level for the S&P 500?
The large-cap index made a major low in that price area on August 5 (green arrow). On that day, the low for the index was 5119, while the closing price was 5186. 5150 is right in the middle of those two figures.
Another reason to watch the 5150 level is the A-B-C-D pattern that is playing out on the chart right now.
If we measure from Point A, the February 19 close (this was the last time that the S&P 500 closed at an all-time high), to Point B, the March 13 close (at the time, this was a six-month low, making it a significant price level), the distance is 623 S&P 500 points.
Subtract 623 points from Point C, the March 25 closing price of 5776 (the highest closing price since Point B’s formation), and the result is 5153 — again, within just a few points of 5150.
Is a bounce guaranteed in the 5150 area? Of course not. Nothing is ever guaranteed in the markets, as we should all know by now.
But you can bet that I’ll be watching that 5150 area closely. Probably while holding an electric guitar, with the strings tuned down a half-step, played through a Marshall half-stack.
At the time of publication, Ponsi had no positions in any securities mentioned.
