Despite Optimism about a rally, a few things still need to happen first Array ( [cookie] => 9f9b8b-125b44-4eb614-ff9567-508e70 [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 2 [max_usage_crypto] => 2 [lock] => 1 [message] => [error] => [active_member] => 1 [subscriber] => 0 [role] => fsi_macro [visitor_id] => 593469 [reason] => [method] => ) 1
SPX’s technical trend and momentum remain bearish but are nearing areas in price and time this week, which might produce a short-term low, allowing for the start of a sharp bounce into February. Given the orderly selling that has occurred this month vs. the abrupt, unexpected decline in mid-December, it might be unlikely that capitulation measures happen right away before Equities bottom. 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, a reversal to this recent downdraft looks quite likely this week at a time when many investors least expect it. However, the extent of the breadth deterioration has proven severe in recent weeks and a bounce in Equal-weighted SPX might be necessary before having too much confidence that a sustainable low is firmly in place.
Yesterday, I discussed 10 key reasons why SPX was getting ready to rally, and I believe this will likely come to fruition over the next week. However, if Tuesday’s roller-coaster ride shed any light, traders remain unwilling to make big bets ahead of what’s widely perceived to be a very important CPI report on Wednesday. Furthermore, I do not have a lot of conviction just yet that lows are in place. Ideally, CPI would not produce as moderate/soft of a report as Tuesday’s PPI did, resulting in SPX pulling back to 5690-5725 before lows are in place
Overall, a few things remain unresolved and still could allow for SPX to initially go lower post-CPI before any material bottom is in. These are as follows:
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