Fast Corrections, Bearish Crowds, and the Bounce That Might Be Brewing
Today I want to discuss why I’m getting cautiously optimistic—yes, cautiously—about this bounce.
We just saw the S&P tag that key 557 level, a zone that has been acting like a magnet for weeks. Two weeks ago, it looked like we were going to break right through it.
But then?
A huge Friday afternoon pulse sent the market flying in the last 30 minutes.
It gave us a bounce that has since held up surprisingly well. Now, here we are with some solid follow-through and upward momentum. Could this be the start of something bigger?
Maybe.
And I say that because there are some interesting data points working in the market’s favor.
For one, we just came off one of the fastest 10% corrections in recent memory. These kinds of quick flushes tend to shake out the weak hands—and historically, they’ve led to big rebounds.
Looking back at other rapid corrections, we usually see strong gains over the following three to six months. That doesn’t guarantee anything, of course, but it sets the stage for what could be a powerful move if buyers stay active.
Another thing worth noting: sentiment has gotten super bearish.
That’s actually a very bullish sign.
When retail investors are running for the hills, the market tends to do the opposite. It’s one of those classic contrarian signals. Add in some signs that institutional buying is starting to pick up, and we could be looking at a decent Q2 setup.
So, how do we trade it?
Well, just like I said, I think we can trade it cautiously.
I like trading the SPY up to the $582-585 range as an initial target and seeing what it does from there.
Similarly, I like trading Apple, LLY, Nvidia, and even Tesla to partial retracements as targets and then giving them a chance to figure out their next move.
In other words, I think we can play some of this short-term optimism, and I am even optimistic about bullishness beyond that, BUT…
If price corrects and pivots, we can’t be all in targeting all-time highs or we’ll get crushed on a bearish move.
So make sure your targets are within a reasonable range and then plan on waiting for the next break up or down. If up, all clear to aim for all-time highs. If down, play shorts right back to the recent low from March 12.
— Nate Tucci
P.S. I created a “text list” to send you my favorite stock of the day. It’s free to join and you can sign up here. I think this will help you!
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