The downward movement of the stock market seemed quite well signaled in recent days, as I noted the rise of the AGT on tax day and the unimpressive price action on Monday and Tuesday.
Yesterday's liquidation saw an increase in volume, but not by much, so either the selling will intensify, or it was just a one-day miracle. The volume of S&P 500 futures was not remarkable.
The volume came in waves, and yesterday may have just been the beginning of the next one. If the volume is significant today, it is probably because sellers are pushing prices down.
Yesterday's price action looked a lot like what we have seen in recent weeks, just the constant selling pressure that happens almost all day, except for the last 30 minutes. If this is the beginning of wave 5, we likely have a long way to go, and that involves reaching the lows of April 7.
The level of 4,500 that I have talked about so much over the past 18 months is just a region; for what I know, the floor could be around 4,200 or 4,700. But I think it’s a good range; we need to assess things as they evolve. Of course, my viewpoint could be completely wrong and today's decline was just an illusion.
This is an area where we can start to assert that stocks are at least close to their fair value, based on what I believe are the earnings for 2025.
I think it's the foreign exchange market that will tell us what will happen, as it is clear at this stage that when stocks fall, the US dollar weakens, due to capital outflows globally. Well, the USD/JPY is on the brink of a major breakdown to the downside. A break of the support at 142 could easily lead to a return to 137-138, and if the USD/JPY falls, the S&P 500 and NASDAQ will likely follow.
