Technical analyst has a warning about markets

Let’s talk about April 22. That day, the Standard & Poor’s 500 jumped 2.5%, which is nice in and of itself. 

But it also reflected investor relief that China and the United States might start to resolve their trade differences and that President Trump said he wasn’t going to try to fire Federal Reserve Chairman Jerome Powell.

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Beneath the surface, something else happened. The S&P 500 broke above a key indicator line that technically-minded investors watch carefully, and that move up suggested stocks could go higher. The S&P 500, in fact, climbed nearly 12% through May 29.

What happens now, however, is a little tricky if one listens to technical analyst Bob Lang, a contributor to theStreet Pro. Based outside Boston, Lang is known for his work in options and stock trading.

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In a podcast interview with Chris Versace, manager of theStreet Pro portfolio, Lang said he wants to see confirmation of that buy signal before getting too bullish. (It’s called the Moving Average Convergence Divergence Indicator, or MACD for short.) 

The confirmation hasn’t come yet, Lang said. 

You can watch the video here. 

The macro issues at work

There are macro issues in the way: 

Tariff and trade worries. Lang is worried about lack of progress on trade deals. 
Inflation worries. The Personal Consumption Expenditures Index showed annual inflation in April dropping to 2.1% year over year. Excluding food and energy, the change was 2.6%.  Worries about when the Federal Reserve will cut interest rates. Lang believes the Fed is also focused on bringing inflation down to 2% or lower.

The CME Group’s FedWatch tool sees two cuts, maybe three, before the end of the year but probably not before September. (President Trump and Fed chairman Jerome Powell lunched last week, and the president said he thought the Fed should cut rates now.)

The Fed’s key federal funds rate is still at 4.25% to 4.5%, and it is high enough to help keep mortgage rates near 7% and limit activity in the housing market.

The Federal Open Market Committee, which sets the rate, cut it three times in the fall of 2024 from a post-pandemic high of 5.25% to 5.5%. 

The committee’s Fed’s next meeting is June 17-18, and it’s fairly important. At the meeting, the committee will also release their personal projections of where they see the economy is headed.

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And, Lang said, the Fed’s policy effectively is a warning for investors not to speculate too much. The Fed’s job really isn’t to bail out the stock market, Lang said.

There are other issues. Nvidia  (NVDA)  was one at the end of the week with first-quarter earnings. Lang was hoping for a strong earnings report that would push the shares solidly above $137. 

The earnings were better than expected, especially given that the U.S.-China tariff dispute is limiting the semiconductor giant’s business in China. The shares reached nearly to $140 in early Friday trading, then fell back to $135 at the close. 

Still, Nvidia ended May up 16.8%. The S&P 500 rose 6.2%, its best monthly performance since 2023. Futures trading in stock indexes late Sunday suggested stocks would open modestly lower.

Traders working at the New York Stock Exchange on Thursday.

Bloomberg/Getty Images

Another issue: money flow. “At the end of the day, it’s the Big Money investors like the hedge funds, the pension funds, the charitable trusts, the mutual funds that it is really moving markets.” 

Lang is a fan of the Chaikin Money Flow indicator (available in charting tools on many websites). The indicator offers views of money pouring into stocks or staying on the sidelines. Money poured into the market after April 22 but has eased in the last week. 

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The weird pattern hitting the market

Lastly is what Lang calls the current “wash, rinse and repeat” pattern.

The president or an administration spokesperson offers “a shocking word,” Lang said. That’s followed by a bit of investor panic that markets might get out of control. 

(Which is what happened after President Trump’s tariff announcement on April 2.)

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Then, the administration walks the idea back, and the panic subsides. 

So, an investor should pencil in smart price targets and pounce when a target says “buy.” (In Nvidia’s case, that might be if the shares fall to between the stock’s 50-day and 200-day moving averages, or $116 to $127.)

That’s followed by patience. Jumping in and out of a stock rarely pays, Lang said. 

Related: Veteran fund manager who predicted April rally updates S&P 500 forecast