MW The stock market may be soaring, but here's where the sellers are likely waiting

By Tomi Kilgore

The S&P 500 soared to and slightly above a zone of heavy resistance as Trump's latest tariff 'pause' gave sellers a chance to get rid of unwanted positions

The stock market may be soaring Wednesday after President Donald Trump essentially erased the possibility of a worst-case scenario - for now - but that doesn't necessarily mean the selling is over.

As dramatic as the bounce is, there's reason to believe that sellers still have positions they want to move, and they may even be hoping for a bit of a bigger bounce so they can start unloading.

The S&P 500 index SPX shot up as much as 8.7% to an intraday high of 5,417.45 after the announcement of a tariff "pause," before paring some gains to be up 7.4% in afternoon trading.

That mercifully halted a four-day, 12.1% tumble to Tuesday's 11-month closing low.

A selloff that sharp tends to leave a number of resistance levels in its wake, as those who wanted to sell either couldn't react fast enough or chose not to sell into a falling market.

The first big resistance level was the gap in the charts created on April 4 between that day's intraday high of 5,292.14 and the April 3 low of 5,390.83.

Gaps created on declines often act as resistance when revisited because they depict areas where investors were unable to act. So investors looking to "sell on a rally," as the saying goes, can now act when given the chance.

The S&P 500 peeked briefly just above the top of that gap before pulling back into the zone, to confirm the resistance.

Another big price gap was created on April 3 after Trump's tariff announcement. The intraday high that day was 5,499.53, well below the April 2 low of 5,571.48.

Another aspect of price gaps is that they often act as a vacuum. As a declining market looks for areas to consolidate on a bounce, gaps can look attractive given that the market hadn't actually seen those levels on the way down.

Many chart watchers assume that eventually, all price gaps will be filled.

While there are some technical signals to suggest Wednesday's bounce con continue (see below), BTIG technical analyst Jonathan Krinsky doesn't believe, under current conditions, the market has the strength to fill the April 3 gap before the selling resumes.

Kudos to Krinsky for what he wrote in a note to clients on Tuesday: "We don't know about the higher one, but [the gap to] 5,390 seems likely to get filled" before the S&P 500 turns "meaningfully lower."

The rally did fill the first gap as Krinsky called for, and it also satisfied the first key retracement target based on the Fibonacci ratio of 0.618, or 1.618.

That ratio, which is also referred to as the golden or divine ratio, given its prevalence in natural systems, has been adopted by many Wall Street chartists to calculate targets for a bounce or pullback.

For the S&P 500, that first Fibonacci retracement of 38.2% (1 minus 0.618) of the selloff from the Feb. 19 all-time intraday high of 6,147.43 to Monday's intraday low of 4,835.04 came in at 5,336.37.

The next key retracement target is 50%, at 5,491.24, which is just below the bottom of the April 3 gap.

The final key retracement of 61.8% would come in at 5,646.09, which is above the top of April 3 gap but just below the April 2 close, before the selloff began. Fibonacci followers believe that if a retracement stays within 61.8% of the prior move, it remains governed by that previous trend.

But as Krinsky points out, the market's current bounce will likely peter out well before the 61.8% retracement is reached, on its way to eventual fresh lows.

A bigger bounce may be coming, but how long will it last?

Krinsky provided one compelling reason he believes Tuesday's bounce could last for a little while longer and reach into the April 3 gap-resistance zone.

On Monday, the notional value of the trading volume in the SPDR S&P 500 exchange-traded fund SPY was $129.4 billion - the price times the number of shares traded - based on FactSet data, which Krinsky noted was a record high.

"Over the past 10 years, the four prior largest notional volume days all marked tactical [or tradable] lows, but all of those were re-tested and in some cases meaningfully broken over the ensuing weeks," Krinsky wrote.

He said all of the four previous high-notional volume days led to at least a 50% retracement of the prior downtrend "before turning back down."

That suggests the S&P 500 could potentially sneak into the lower part of the April 3 gap before the rally fades.

-Tomi Kilgore

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April 09, 2025 15:11 ET (19:11 GMT)

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