CPI looks to be a possible catalyst for a turn if SPX gets near 5700

SPX’s technical trend and momentum remain bearish and not oversold, and Friday’s breakdown to new monthly lows is considered a near-term technical negative for patterns on many US indices and ETFs. While a short-term low could be approaching next week, possibly into CPI, it’s important that markets start to exhibit some elements of capitulation that were lacking as of Friday’s close. Given that good economic news has resulted in Treasuries selling off sharply, both Treasury yields and SPX, QQQ, and RSP all made breakouts on Friday (Bond yields breaking out higher, while stock indices made downside breakouts). Given the return to Stock/bond positive correlation, some evidence of yields peaking will likely be important to trust any bounce in the Equity market.   Stocks like AAPL and NVDA look to have arrived near important levels, and given the worsening in sentiment in recent weeks, an about-face could be approaching. However, the extent of the breadth deterioration has proven severe in recent weeks, and today’s support violation suggests that any low remains premature.   

As the daily SPX chart shows below, a breakdown of prior lows that held back in December and early January doesn’t give much comfort that support has been reached yet. Rather, a close under 5829 could produce near-term downside acceleration, which might cause SPX to get close to 5700 before lows are in place.

As discussed last week, 5700 lines up near last November's lows and has some Fibonacci-related properties based on the prior August-December rally.

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