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Equities Continue Their Normal Pause; EBAY Looks Attractive

Equity markets continue to track a normal intermediate-term pause following the Q4 surge - The technical backdrop remains unchanged despite growing worries of the economic impact of the coronavirus. The S&P 500 remains above key trend support defined by its 15-week moving average near 3240 as weekly momentum indicators, tracking 1-2 quarter shifts, continue to unwind from overbought levels established in early Q1. In effect, the weekly rate of change over the past 3-5 months continues to decelerate for the S&P 500 and has turned negative for more cyclical markets, such as EAFE, EM and the Russell 2000 along with the financial, industrial and resource sectors. However, while the weekly momentum for most equity markets has peaked, the absolute price profiles of these markets remain relatively well behaved in broad trading ranges that are holding above key support levels. At this point, we continue to view the recent market volatility as a normal multi-month consolidation following the impressive surge in Q4.

Beyond equity markets, we are seeing mixed signals as rates continue to decline, Oil and Copper bounce, and the USD surges - The decline in US 10-year rates and strength in the USD DXY index continues to signal that markets are in a risk off mode.
However, in contrast to rates, WTI Oil has bounced from deeply oversold levels back above a key support band between $50-52. Likewise, Copper has rebounded back above its key support band between Comex $245-250. While the near-term strength in both Oil and Copper may simply prove to be an oversold bounce, it is a noteworthy silver lining that both have rallied against the backdrop of surging US dollar. Lastly, lumber, as one barometer for US domestic activity, continues to rally from the 16+ month base it cleared earlier this month.

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