by Michael Tarsala, CMT
The latest market analysis from BofA sees dark clouds, a storm, then the likelihood of a summer rally.
The latest from its technical team calls for a stock correction to the 1,250 to 1,300 range on the S&P 500, although the team recommends buying dips. You can read more here.
Source: Stockcharts.com
What I like about the BofA analysis is that it doesn’t throw out hard-and-fast numbers. It allows for the fact that support and resistance can be in ranges.
Their call makes use of Ichimoku clouds. You can learn all about them at Stockcharts.com. In the chart above, you see them as the green shaded area, and they reflect expected price support zones. As you can see, the support zone has been broken in recent days.
What happens next? Well, the 1,250 to 1,300 area is a very sensible place for the market to head next. It’s precisely in line with the next big volume support level, marked by the long pink bars that come from the left of the chart. The longer they are, the stronger the support. And 1,250 to 1,300 provides just a little wiggle room on either side of the lines I marked in black.
If things play out the way the chart above (and BofA) suggests, long-short models, swing trading strategies, and money managers who will scale into risk-on trades as the market makes a turn all could be a viable options.
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