Failure to turn down right away would likely postpone any retest

Regardless of the negatives of Monday’s downdraft, along with the ongoing worry of tariffs, US indices continue to hold up in resilient fashion, with SPX having closed within 85 points of the early month all-time highs. The recent consolidation over the last two months has not served to derail the intermediate-term rally, and while I still can’t rule out the possibility of a pullback in the short run, this was always thought to be a temporary affair which should make SPX attractive on weakness over the next 1-2 weeks. At the current time, SPX arguably is running out of time to engineer a selloff and can’t afford to move much higher without postponing any further selloff and steering indices back to new all-time highs. 

Two factors look specifically important:

  1. Treasuries look to be on the verge of a large rally (Given the former (and ongoing) correlation with SPX, this stands to likely be a bullish development for risk assets.
  2. Sentiment remains quite subdued on the retail front, with many investors, along with legacy media, quite concerned about the effect of tariffs.   While I also share those concerns, my takeaway after the last couple of days is:  “Don’t believe anything until it actually occurs, as tariffs look to be very much  open to negotiation.”
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