The technical setup for the S&P 500 remains challenging into strong resistance in the mid-4100s. Bearish momentum divergence seen on 4/20 and 4/21 has forecast value for another week. Near-term support sits in the 4010-4040 range.
This morning, the 5/10-year yield curve flipped into positive territory for the first time in 9 months. A positively sloped 5/10 yield curve is our early signal of an imminent Fed pivot and catalyst to add equity exposure.
Two of the three most likely Fed scenarios would likely result in upside for the S&P 500. Though the probability is something under ~5%, the ‘no hike and pause’ scenario would probably result in initial SPX upside of ~1.5%.
The probability for a technical US debt default remains below 10%, but the likelihood for a credit rating downgrade may be fairly high. The debt ceiling has been raised 78 times since 1960 with two recent events that came down to the wire resulting in
The S&P 500 is extending to the upper end of its technical resistance range below 4200. A sustained break above ~4200 seems unlikely given bearish momentum divergence seen on Thursday 4/20 and Friday 4/21.
Bearish momentum divergence signals triggered at the end of last week while the index was overbought. The positive YTD performance in the SPX has come from very few stocks with investors crowding into mega-cap names. Narrow market breadth is a bearish technical signal and Q1
Today’s risk-off trade follows bearish momentum divergence signals late last week. The S&P 500 was in technically overbought territory when these signals triggered, and we expect the current sell off to extend until it reaches technical oversold levels.
Afternoon results from FRC will impact near-term regional bank sentiment. Relatively stable deposit flows and unchanged loan growth guidance are the most surprising takeaways from those who reported last week.
Takeaways from the earliest Q1 reports reveal strength in high-income consumer spending and travel demand.
Signs of easing banking sector stress has resulted in a return of the soft-landing narrative, higher bond yields and more hawkish Fed rhetoric. Although possible, an economic soft landing amid higher yields and further monetary tightening seems like an improbable outcome.
