Inside Markets

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.

Light equity positioning and elevated bearish sentiment have been major supports for equity markets in the recent past.  

The recent backup in bond yields looks like normal consolidation in a developing bullish trend. The term ‘bullish trend’ refers to bond prices, meaning we expect lower yields in the months ahead.

We’ve been saying for several weeks that strong technical resistance in the mid-4100s should cap the S&P 500 (SPX) until there’s a change in macro fundamentals. Bull markets lead a cyclical recovery, but a cyclical recovery isn’t possible when all segments of the yield curve

The ISM new orders/inventory ratio has been signaling accelerated PPI disinflation for the last several months. Producer prices tend to lead consumer prices by a similar amount of time, and the widening spread between CPI and PPI is also a sign of accelerating disinflation.