Technically Speaking – May 2021

May 3, 2021

Technically speaking:
Resistance level: SP500 4200 -4225
Support level: SP500 4150, 4040- 4100, and then 4000

The markets continue to move higher in the face of lofty valuations. The reason is simple, the market is trading on fiscal support from the Feds and the ECB and NOT the Fundamentals. Most experienced money managers have had this conundrum before. The question is how to invest when you know a market decline can come at any time. Technically we are continuing to break through resistance. Eventually, the markets will retreat to support. Being cautious until we see a 3% to 7% decline is probably a good idea. However, for the next few quarters, declines to the support area should be bought, while rallies to areas of technical resistance should be used to take some profits.

Under 4100 on the S&P 500 would be a place to start looking for opportunities. Indexes are an easy way to put cash to work. Eventually, the fundamentals will matter, and technical resistance levels will matter, but for now, support is more important. The red flag will be when the FED actually says they will temper their bond-buying programs and allow rates to move higher to combat inflation. That day will come at some time. For now, learn how to use technical analysis to your advantage to have a mathematical reason for adding a protection strategy to your portfolio