Can Markets Rise?

RLT Newsletter 4.5.26

Happy Easter! Christ is Risen. Can the Markets Follow Suit?

Despite Thursday’s sharp volatility, the major indices closed nearly flat compared to Wednesday. As long as we continue chopping in this high-volatility environment below the 200-day SMA, I’m prepared for anything.

Since Tuesday’s strong reversal candle on elevated volume, I’ve been watching for a relief bounce into April. However, most of the major downside setups remain intact. The QQQ still needs a decisive close above its 200-day SMA to negate the risk of a quick flush toward the $540 zone.

QQQ Daily Chart

Based on the key charts I follow, we appear close to putting in a bottom and starting the next wave higher. That said, this upcoming leg higher looks likely to be B-wave with a lower high after the significant destruction we’ve seen across the charts. History shows that a bounce like Tuesday’s is often just a short-term low, not the ultimate bottom, before a more punishing C-wave drop gets underway.

The tricky part? B-waves are among the most deceptive moves in technical analysis. By the time the rally gains traction, many will be celebrating a return to new all-time highs… right before the rug gets pulled for a violent five-wave decline that catches everyone offsides.

This market was simply too well-hedged and pre-positioned for a drop for the “real” crash to arrive immediately. Instead, we’ve seen a relatively controlled, stair-step decline, classic behavior for an A-wave.

SPY Daily Chart

Signs of Emerging Strength

Several key ETFs are showing tentative resilience:

• IWM held its 200-day SMA, yet is still stuck between its long term moving averages.

• DIA defended its prior all-time high, retested the 200-day SMA from below for the 4th time, and is holding.

• SMH reclaimed its 100-day SMA after only two days below it and pushed back into its point of control.

These are constructive developments and point to a potential bounce brewing. However, all three charts are now pushing into meaningful resistance zones, which should make next week particularly interesting and could mean more chop is heading our way.

ARKK remains in a well-defined downtrend channel and recently found support at the lower trend-line. A move higher, similar to February’s relief rally would make sense. It should find resistance near the $75-$80 level, where the upper channel line converges with longer-term moving averages.

ARKK Daily Chart

Sector Insights

We’re also seeing key supports hold across several major sectors:

• XLF (Financials), XLY (Consumer Discretionary), XLP (Consumer Staples), and XLV (Health Care) found footing near the 100-week SMA.

• XLI (Industrials) held the 200-day SMA.

These developments suggest some form of bounce could be developing now. That said, bulls shouldn’t get overly excited. Most of these sectors look likely to stall at lower highs before turning down again for another leg lower, adding further weight to the broader A-B-C analysis above.

XLY Daily Chart

Gold and Bitcoin

Gold is playing along nicely. It either put in its low or the next dip will be a buyable one before a solid push higher. The metal touched its 200-day SMA, bounced strongly, and has already reclaimed the 100-day SMA. This isn’t an environment for aggressive breakout buys, so I’d approach any new gold or IAU (the ETF I use) positions on limit orders.

XAUUSD Daily Chart

Bitcoin is as sideways as it gets and shows no clear signs of resuming an uptrend. It’s essentially a coin flip from here: resistance sits overhead near $74,000, with next support below around $59,000. I still expect another lower low before this bear market finally ends, and I don’t expect it to end for several more months. Once BTC works its way back down to the 200-week SMA and its realized price around $54,000, the long-term risk/reward becomes much more compelling.

Trade of the Day: ALAB

My favorite chart from Thursday was ALAB (Astera Labs). I sold puts on Wednesday, then sold more puts and bought shares Thursday morning. The green to red move with a strong bullish engulfing candle was impressive to say the least.

I would have preferred higher volume, but the price action is still quite compelling: it closed back above the 100-week SMA after retesting a major prior resistance level (now support) and filled the breakaway gap from last July, a level I’ve been watching for six months.

The stock also dropped about 17% below its trend channel, mirroring its behavior from last April. The similarities are striking. Now we’ll see if we get sustained bullish follow-through.

I plan to add more on a dip back to the 100-week SMA, with a final add at $92.49 if it gets there. I do not want to see a close below that level which is a major support and the point of control, as it would begin to invalidate the bullish setup.

ALAB Daily Chart