‘This will be a little bit worse than a normal correction’: April’s stock-market selloff isn’t over yet
By Michael Brush
Technical analysts Ralph Acampora, Larry Williams and Vance Howard see market weakness ahead
Be skeptical of the U.S. stock market’s rebound – there’s probably more weakness to come. The good news is this won’t be the end of the bull market, because a recession is probably not in the cards. So, stock purchases you make amid this selloff stand a good chance of working out.
When to buy? Be patient, and wait for the panic moment that so often punctuates corrections. It could come in mid-May.
That’s the outlook of three veteran technical analysts I recently checked in with for guidance on what to expect now: Ralph Acampora, Larry Williams and Vance Howard. Since they all have slightly different outlooks, let’s take them one by one.
Acampora: A meaningful low by mid-May
“There is more to come,” says Acampora, an icon of technical analysis in the 1990s and 2000s. “If you have cash, just be patient until we see more signs that we are at a bottom in the next few weeks. This will be an opportunity to add to positions. This is not the end of the bull market which started October 13, 2022.”
Acampora believes there has been too much complacency about the April weakness, and that more fear and panic needs to show up to mark the bottom. Typically, this happens in the form of a big move down at the open, followed by a big reversal and large intraday rally. “I think we have to shock everybody a little bit – even the technicians saying ‘Oh, this is normal correction,'” he notes. “I think this will be a little bit worse than a normal correction of 5% to 10%; I am now looking at 12% to 15%.”
Acampora expects a meaningful low by mid-May and a month of choppiness on the way down. “People will sell into strength; it will be choppy,” he says. In pullbacks like this one, he looks to the sectors down the least as the ones that will lead coming out of the selloff – in this case, consumer staples, energy and industrials.
I asked Acampora for calls on some popular stocks. Tesla (TSLA) could see weakness that takes it down to $135 to $140; he sees support at $118 to $120. Meta Platforms (META) could find support at $455 to $460, while Nvidia (NVDA) could see a selloff to the $750-$780 range. Amazon.com (AMZN) could fall to $168 to $170, and Alphabet (GOOG) (GOOGL) may fall to $150 to $151. He says the Technology Select Sector SPDR exchange-traded fund XLK could drop to $184, while the SPDR S&P Biotech ETF XBI could make a move down to $78.
Acampora correctly predicted in April 2023 that there was more market upside, at a time when many investors still had serious doubts about the emerging bull market. He famously made several great calls when he was in the spotlight decades ago, like his June 1995 forecast that the Dow Jones Industrial Average DJIA would hit 7,000 when it was in the 4,000-point range. The Dow hit his target, and then he upped it to Dow 10,000, which it also hit. Those calls helped put Acampora on the map as a technical-analysis market guru while at Prudential during the late 1990s. He’s retired now, but still follows the markets regularly.
Williams: Sell into strength
Trader Larry Williams likes to take positions in the futures markets based on his analysis of cyclical patterns in stocks and economic fundamentals. Williams won the 1987 World Cup Championship of Futures Trading by posting a 11,376% gain, which turned $10,000 into $1.1 million. Since then, Williams has amassed a large following.
Williams says he expects U.S. stock market strength through May 1. But he suggests selling the strength because he expects weakness to follow through the middle of May. That weakness could be followed by a relief rally into early June, then another leg down in July. “I am heavily short here,” he says. He expects a strong end of the year as a rally gets under way in early September. Here’s a chart tracking his near-term forecast.
Howard: ‘This is creating some great buying opportunities’
Vance Howard uses technical analysis to help take the emotion out of investing at his firm, Howard Capital Management. He has a system he calls the HCM-BuyLine, which is basically a momentum and trend-following approach that often works well. The system has led to outperformance at both his HCM Tactical Growth HCMGX and HCM Dividend Sector Plus HCMQX mutual funds, which excel at five years compared to their benchmarks and competing funds, according to Morningstar Direct.
Howard says the market’s current relief rally may continue for a few days. “The markets are deeply oversold on a short-term basis, so a modest bounce should most likely be coming,” he notes. “There will probably be a few up days followed by additional selling pressure before the market finds a place of support. The market will take a little time to work through the technical damage of the current selloff, so don’t expect a straight shot back up, but rather a slow grinding process, which is healthy.” Like Acampora and Williams, Howard expects the downside volatility to last through around mid-May.
Howard also agrees that the bull market is not over. “This is creating some great buying opportunities,” he says of the current bout of weakness. He singles out computer-chip stocks as a place to shop, a favorite group for him. He highlights Advanced Micro Devices (AMD), Nvidia, and the iShares Semiconductor ETF SOXX.
Michael Brush is a columnist for MarketWatch. At the time of publication, he owned TSLA, META, NVDA, AMZN, GOOGL and AMD. Brush has suggested TSLA, META, NVDA, AMZN, GOOGL and AMD. in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks.
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Plus: Why you shouldn’t be too quick to dump your stocks
-Michael Brush
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04-27-24 1019ET
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