Inside Markets — Risk/Reward

The SPX tested levels below 5772 support (January 13 low) earlier this morning but is now higher. We keep a bullish tactical bias at closing levels above 5772. A break below the 200-day moving average at 5728 would likely trigger CTA selling/accelerate downside momentum to challenge the September upside breakout at 5640. In our view, closing levels below 5640 would reverse the bullish tactical trend.

Markets are now priced for a growth slowdown that surpasses what’s implied by recent US growth data. The US Economic Surprise Index (ESI) is in negative territory at -9.8 but recovering from last Friday’s low of -16.5 with risk/reward skewed into the upside into Friday’s Jobs Report. Last week’s AAII poll also suggests an increased risk of a recovery after bearish sentiment reached its fourth highest level in history with positioning metrics now below neutral.