S&P 500: Bottom Watch Begins
Sentiment, Positioning, and the Trade Map Ahead
The Bottoming Process
Last week’s note concluded that until a broader trend reveals itself, the strategy would remain to trade the range. That still holds true—but the tone is beginning to shift.
While the trend is not yet confirmed, the market is starting to show signs that a bottoming process may be underway. And with that, it’s time to begin mentally preparing to act, rather than freeze in fear—a mindset echoed in this week’s newsletter image— The bull, dressed as a gladiator—geared for battle, but not yet charging.
This isn’t a call to jump in with both feet. The April lows could still be retested—or even briefly broken. In fact, a revisit lower would make sense. According to Bloomberg, retail traders poured $6.6 billion into leveraged long ETFs last week—a level of enthusiasm that markets often like to test before rewarding.
My speculation is straightforward: the S&P 500 may revisit—or even break below—its recent lows, but through the lens of sentiment and positioning, this appears to be a decline worth buying. The bottoming process seems to be underway, setting the stage for a strong relief rally to follow.