A couple of weeks ago, I mentioned how the had broken out of its trading range and that to confirm the breakout, we would need to see a successful retest. Well, that’s what we just got this afternoon. In a follow-up to the selling on Friday, today we saw follow-through on the selling after gapping up initially. As a result, the equal-weighted index tested the breakout point at 8306. What was once resistance will now be support?
My guess is as good as yours. But there is some confluence around the 8306 area, because it about matches the size of the biggest drawdown off the lows of 2026 made in late March (first highlighted rectangle), which could raise the odds of at least a short-term bounce.
If we look closer at the 60-minute chart, so far so good. The market has bounced off the support zone, and if we can get back above the prior highs, then that would all confirm the breakout, which would obviously have bullish implications for the market as a whole.
Onto the economy, Q2 estimates are now at 3.3%, down from as high as 4.3% just a couple of weeks ago. The economy continues to run at a mid 2% pace on a year over year basis.
It was encouraging to see some decent job gains last month, along with upward revisions to the prior two months. But to put this in context, the growth in the jobs market remains well below average, currently a 0.3% annual pace. We definitely want to see this accelerate in the coming months to feel good about the labor market.
So the economy is growing at a slow pace but earnings growth is soaring. Q1 is 98% done and the growth rate is almost 30%. Companies will begin reporting Q2 results next month, and the estimates are for 23% growth. I will be doing a Q2 earnings preview in a few weeks with more detailed information along with my own predictions.
5 Stocks Our Experts Predict Could Double In the Next Year
By submitting your email, you'll also get a free pivot & flow membership. A free daily market overview. You can unsubscribe at any time.