Any investor with a passing interest in technical analysis is likely focused on how the Standard & Poor’s 500 index (SPX) will react to its declining 200-day moving average (Dma) just below 3000. A pullback or pause near current levels would not be surprising, but my technical outlook remains unchanged, and I would continue to caution investors from turning too bearish.

Of course, I can appreciate the reasons many investors are bearish technically and fundamentally, but I also continue to see technical evidence pointing to a broader recovery. The SPX remains well above its 200-week moving average and the 50-day moving average just turned up over the past week, after turning negative in late February. Overall I continue to expect pullbacks to be shallow and short lived.

Growth stocks have certainly rallied a long way with many stocks now well advanced and vulnerable to profit taking. However, it is the behavior of cyclicals that is the noteworthy technical development. Last week, I highlighted that cyclicals were at an important inflection point and potentially establishing retests of their March lows featuring financials as an example.

The past weeks rebound in cyclicals has reinforced this thesis with the technical backdrop incrementally improving. For example, ...

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