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Expect Weakness to Be Shallow; Look to Cyclical Sectors

The Standard & Poor’s 500 index (SPX) pushed past the widely watched 200-day moving average near 3000 last week, as we headed into May’s month-end. A short-term negative divergence has been developing over the past two weeks with VIX not falling below the May 12 lows at 26 while the SPX has made new recovery highs.

Another short-term pullback in early June would not be a surprise but overall, the technical behavior remains positive. I continue to expect weakness to relatively shallow and short lived. For traders focused on levels, first support is at the 15-day moving average at 2940 followed by the now rising 50-day moving average at 2772 with resistance at the March bounce highs at 3136.

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