Today is the first trading day of March! Last month was a wild one so let me tell you what I think we can expect for March.
First of all, we saw the Dow fell 10% in early February and even fall 1,000 points in a single day.
That drop scared people for about 72 hours and I already talked about why I thought that the stock market really dropped already so I’m not going to do that today.
One thing though is that stock market investors are basically more bullish than ever. Of course, we already saw the Investors Intelligence survey hit a historic extreme in regards to bullishness and there are still almost no bears in the market even after the recent drop.
We now know that on the day of the drop individual traders were buying and not selling and that buying continued as the market put in a low and rallied.
In fact, this Monday saw the second biggest daily inflow in the QQQ ETF in history and in SPY it was the third biggest inflow day for it ever!
And then of course just as everyone buys the market took a dump yesterday with the DOW falling over 300 points and the S&P 500 for over 30.
So what is next?
Well in my view the stock market is likely to pause and go sideways for most of March to set up a big move later.
Take a look at this chart.
The current major support level on the S&P 500 is the 50% retracement point of the whole rally, which is now at 2,662.
Robots will buy there if the market falls more from here!
Most likely that level will define the support of the next few weeks.
That might sound silly to you if you don’t use charts, but no one invests using valuations anymore and this is a market where buying pressure mainly comes from buybacks, trading robots, and small investors simply buying whatever goes up the most.
Ironically if the market were to just fall hard now and go right on through it and down to the February lows next week that would actually be more bullish for the stock market in the long-run.