![\"Stock](\"\/blog\/wp-content\/uploads\/2020\/05\/MW-GJ957_car_ra_20180527122949_ZG-1200x675.jpg\")
<\/p>\nSome indexes rebounded over 40% since the March lows and there\u2019s now resistance holding back further gains<\/p>\n
<\/p>\n
<\/p>\n
Published: May 2, 2020 at 2:54 p.m. ET, By Simon Maierhofer<\/p>\n
U.S. stocks have soared, but low trading volume suggests many investors got shaken out in March and have been sulking on the sidelines.<\/p>\n
As the chart below shows, trading volume for the SPDR S&P 500 Trust US:SPY, which tracks the benchmark S&P 500 Index US:SPX, rose during the selloff and fell during the rally.<\/p>\n
![\"SPY](\"\/blog\/wp-content\/uploads\/2020\/05\/MW-IF651_simon1_20200501102702_NS.png\")
<\/p>\n
This is a sad reminder of investors\u2019 tendency to sell during the worst of times and reluctance to buy during the best of times.<\/p>\n
On March 26, near the height of fear, I said in the Profit Radar Report: \u201cWe anticipate a recovery toward 3,000 [points] for the S&P 500 over the next couple months and quite possibly new all-time highs in 2020.\u201d<\/p>\n
Unfortunately, most investors did not get to participate in this fast-and-furious rally. This may have started to change as there\u2019s been a small volume spike in the past few days. Some investors may want to get back in on the action.<\/p>\n
The question is: Is it too late to buy now?<\/p>\n
At this point, I would not chase the remaining potential upside. That\u2019s why I recommended April 29 to equip the stocks bought in March with stop-loss protection. Here is why:<\/p>\n
1. The S&P 500 nearly reached my upside target of 3,000.<\/p>\n
2. The SPDR S&P 500 Trust is \u201cwedging\u201d higher (chart above, see price action inside the purple lines). A wedge pattern is indicative of falling prices more often than not.<\/p>\n
It is quite common for price to move back toward the beginning of the pattern (dashed purple line), which is as low as 245 for SPY and 2,450 for the S&P 500. However, it will take sustained trade below the upper green support line to activate the downside target. Until that happens, price can continue to move higher.<\/p>\n
3. The advance from the March low can be counted as five waves. According to Elliott Wave theory, a complete five-wave rally should be followed by: 1. a sizable decline; 2. an eventual resumption of the rally to new recovery highs. The yellow arrow provides a rough idealized price projection.<\/p>\n
4. The Russell 2000 US:RUT has outperformed most major indexes, including the Nasdaq US:COMP and Dow Jones Industrial Average US:DJIA, for much of this week. However, this outperformance pushed the Russell 2000 and the iShares Russell 2000 ETF US:IWM close to a potent resistance level. The below chart and warning were published in the April 29 Profit Radar Report.<\/p>\n
\u201cThere\u2019s a massive open chart gap and trend channel resistance leading up to 141 for IWM. RSI-2 is over-bought and risk is increasing. A move above 140 over the next couple days looks like a good opportunity to go short, at least for a swing trade.\u201d<\/p>\n
![\"Russel](\"\/blog\/wp-content\/uploads\/2020\/05\/MW-IF652_simon2_20200501102702_NS.png\")
<\/p>\n
The Federal Reserve is funneling unprecedented amounts of money into the stock market. If the S&P 500 can stay above support (2,890) or move back above support (after having fallen below), the Fed\u2019s fire hose could trump the above-discussed factors.<\/p>\n
Since the March lows, the iShares Russell 2000 ETF rallied as much as 43%, the SPDR Dow Jones Industrial Average Trust US:DIA as much as 36%, the SPDR S&P 500 Trust as much as 35.1% and the Invesco QQQ Trust US:QQQ as much as 33.4%.<\/p>\n
This was the fastest rally from a 52-week low ever, but it\u2019s probably gone too far, too fast. Now is not the time to be greedy, but to cash in gains and prepare for a buying opportunity at lower prices.<\/p>\n