Friday’s minor pullback seems to have occurred near a short-term timing pivot which might result in 2-3 days of weakness before turning price back higher. S&P and NASDAQ both lost more than 1% on the day, and pulling back to end near lows of the session could result in Monday also being weak.
Most of the underperformance occurred in sectors that had been outperforming the most thus far in 2023. However, Utilities remained one of the biggest laggards, dropping more than 2%, with XLU finishing at new multi-week lows. Thus, even on a pullback attempt, it remains difficult to find much strength in the defensive areas, which I view as positive.
Furthermore, the SPX wave structure (shown below) still argues that any near-term pullback likely proves short-lived and does not undercut 4000 (and might not even break 4100) before turning back higher into mid to late February.
Until/unless SPX 4000 is violated, I’m expecting that near-term weakness early next week will prove to be buyable yet again for a push back higher, which might last until February expiration.See S&P Front month futures contract shown with Elliott diagram. This points to a grinding rally that’s expected to exceed ...