I'm leaning Bullish, with a Caveat - Thomas Ng Memo 17 March 2025
- whatsyourtradingangle
- Mar 19
- 5 min read
Updated: Mar 26
AI image generator says Bulls are getting ready to charge after some blood-letting on the streets..
On Monday, March 17 at 7:06 PM, I emailed Clients my latest market update titled "I'm Leaning Bullish, with a Caveat" offering key insights on the S&P 500 (aka SPX) - the world's most important index - and more.
Below is the full transcript for your perusal:
'Dear Clients,
Over the past four months, my S&P500 Index chart in my December 2024 memo has already highlighted two critical support levels or potential red flags - for those paying close attention.
Please refer to 11 December 2024 SPX Chart A below for easy reference:
First support level or red flag: 5,853 (now broken)
Second support level or red flag: 5,500+/- (key test ahead)
Upside potential: 6,220 remains achievable as long as 5,500+/- holds
Chart A - SPX Daily Chart dated 11 Dec 2024, note the red flags or critical support levels were already written clearly on the 'wall'
Now fast forward to last Friday's SPX closing Chart B below and you can see that the first 5,853 support level was tested 6 times (see small blue arrows) before decisively breaking down on March 4th, confirming its role as a significant technical support level.
With this breakdown, our focus now shifts to the next key support level at 5,500+/-. On Thursday 14 March, SPX hit an intraday low of 5,504 before rebounding up spectacularly on Friday with a 2.13% gain.
Did you take note of these when reading through my December memo?
Now, a sustained and authoritative break below 5,500 would raise major concerns, potentially signaling the end of the multi-year bull cycle since 2022. However, until that happens, I'm actually leaning bullish.
Chart B - SPX Daily Chart dated 14 Mar 2025, note how the 1st red flag or support level 5,853 were repeatedly tested before breaking down to test the 2nd red flag at 5,500
A Note on Fundamentals
Fundamentals have taken a sharp bearish turn, largely due to heightened policy uncertainty under Trump 2.0, which has created volatility in both the stock market and the broader economy. The resulting impact is clear: US consumers and businesses are cutting back on spending and capital expenditures. Below is a summary of key economic data as of early March, sourced from the Web:
Economic Growth Outlook
GDP Forecast Dropped Sharply
The Atlanta Fed’s Q1 GDP estimate plummeted from +2.5% to -2.8% within days. Weak consumer spending, slower construction activity, and a surge in imports contributed to this decline.
Market Sentiment & Business Activity
Citigroup Economic Surprise Index (CESI) Turned Negative
The CESI, which measures how economic data compares to expectations, has turned negative (-16.5), indicating that recent economic data has been worse than expected.
This suggests market sentiment is deteriorating, increasing concerns about economic weakness.
Purchasing Managers’ Index (PMI) Dipped
February's Manufacturing PMI (M-PMI) fell to 50.3 (down from 50.9 in January), while new orders (48.6) and employment (47.6) dropped below 50, signaling softness in the manufacturing sector.
Key Sector Weaknesses
Construction Slowdown
Residential construction spending fell, prompting the GDPNow model to revise its forecast from +1.4% to -4.9%.Non-residential construction was also downgraded from -2.0% to -2.5%, further dragging growth estimates.
Imports Surged, Hurting GDP
Imports jumped nearly 30% (annualized), largely due to businesses front-loading purchases ahead of potential new tariffs. Since GDP calculations subtract imports, this surge significantly dragged down Q1 GDP estimates. However, imports are expected to moderate in February and March, which could help GDP recover slightly.
Consumer Spending & Savings Shift
Despite a 0.9% rise in personal income, consumer spending fell 0.2% in January, The savings rate jumped from 3.5% to 4.6%, reflecting a more cautious consumer mindset.
And just like that, the hated “R-word” is back in focus - Recession!
Despite Wall Street and the mainstream media amplifying concerns with “U.S. to enter a recession within the next three months” (BCA’s Berezin) or “Treasury Sec. Bessent does not rule out a recession” (NBC) and the outlook dim and grim (see Chart C below) - I'm leaning bullish bias for the medium term.
Chart C - Eewww, you don't say.. the dirty 'R' word is back agaaain!
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Why This Looks Like a Buying Opportunity
Despite the recent market selloff, several contrarian indicators suggest we could be approaching a short-term market low:
Daily RSI (Relative Strength Index) is at oversold levels, signaling exhaustion in downside momentum. See Chart D below.
Put/Call Ratio surged to 0.97, indicating heightened fear. (A move above 1.2 would further strengthen the bullish case). See Chart E.
CNN Fear & Greed Index has dropped below 20 - historically a strong buy signal. (Single digits would be even better!). See Chart F.
AAII (American Association of Individual Investors) Sentiment Survey: Only 19.1% bullish vs. a long-term average of 37.5%, signaling extreme pessimism - often seen at market bottoms. See Chart G.
SPX bearish double top pattern has met its downside target around 5,500 (chart not included).
And of course, the upcoming FOMC Meeting on Wednesday, March 19 is key. Will Powell ride in like the cavalry to save the day again? Will he lay his “FED PUT” on the table again?
Interesting week ahead!
Chart D - SPX Daily Chart dated 11 Dec 2024 vs RSI (relative strength indicator)
Chart E - Put/Call Options Ratio. I would prefer to see a ratio >1.2 or an even more extreme reading
Chart F - The CNNmoney Fear & Greed Index dated 17 March 2025. I would prefer to see a single digit number under 'Extreme Fear' for an even more lopsided reading
Chart G - The AAII Sentiment Survey dated 12 March 2025
ConcLusion: Tactical Buying Opportunity if SPX 5,500 Holds
As long as SPX 5,500+/- holds, this current 10%+ pullback presents an attractive entry point for investors looking to deploy capital.
While macro risks remain, particularly with ongoing policy uncertainty, technical indicators and sentiment data favor a strong rebound in the coming weeks to months, targeting my original Dec 2024 SPX target at 6,220 and more.
However, I will also be penning a longer-term US market outlook for H2 2025, and you should not assume that the SPX will always enjoy a 'happy ending'!
Closing note with Bitcoin Update: IBIT ETF & Key Levels
Meanwhile, Bitcoin’s price chart is also nearing its key support zones. For Clients interested deploying some capital into BlackRock’s Bitcoin ETF (ticker: IBIT), please reach out to me for its key support levels & upside target.
Hint: Support below $80k & target well above $100K respectively! To the Moon they say! :)
Live Long & Trade Well!
Thank you & regards,
Thomas Ng, CMT
Principal Trading Representative
首席股票经纪
Chart source: Tradingview / Stockcharts / CNNmoney / AAII'
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