Most equity indices have seen decelerating price trend momentum over the past two weeks despite improved stimulus and vaccine headlines. The technical picture seems to reflect diminishing marginal upside from improved fundamentals into a period of reduced market liquidity at year-end.
Yesterday’s advance in the SPX puts the index in range of new highs this week. But a loss of momentum over the prior four sessions still has us looking for a pullback to interim technical support near ~3630 and secondary support in the ~3510-3530 range.
The S&P 500 (SPX) is short-term overbought with extreme/elevated bullish sentiment as primary near-term concerns. At the moment, there’s no evidence of sector/cross market divergences or momentum deceleration that often precedes corrective price action. Without these signals, mild downside over a longer period of time
We have a cautious near-term outlook based on extreme bullish equity sentiment (contrarian indicator) and short-term overbought conditions. Bullish sentiment from last week’s AAII survey data remains elevated at 48.06 after reaching extreme levels of 55.84 on November 12. The reading from November 12 was
Visible concerns around stretched valuations in Tech first appeared in early September when impressive earnings failed to generate price appreciation. Yesterday’s sell off in the group came on the eve of potential vaccine approval and the pricing of several high-profile IPOs. Vaccine approval is an
Equity sentiment reached bullish extremes three weeks ago and the SPX is now short-term overbought. In our experience, periods of extreme bullish sentiment have often been followed by ~8-12% equity market corrections with many of those corrections triggered by sharply higher bond yields.
The 5-day moving average of the CBOE Equity Put/Call ratio and weekly AAII sentiment survey are both at bullish extremes. Extreme sentiment in either direction creates an asymmetric risk/reward scenario. And while it remains in place, this level of bullish sentiment will dull the impact
Three weeks ago, the American Association of Individual Investors (AAII) equity sentiment survey reached bullish extremes with a reading of 55.84. This is the second highest level of bullish equity sentiment behind the all-time record of 59.75 reached on January 4, 2018.
Cyclical and value sectors (Industrials, Financials, Materials and Energy) have been leading the S&P 500 to record highs since the 11/9 release of positive vaccine data. New highs based on cyclical/value leadership are generally considered heathier and more sustainable than those based on defensive sector
Two weeks ago, equity sentiment reached bullish extremes, with the weekly AAII poll registering its second highest level in history at 55.84. The record bullish extreme of 59.75 was made on January 4, 2018 with the S&P 500 beginning a two-week long, -12% correction on
