Inside Markets — Signs of Fatigue

The relief rally is showing signs of fatigue as the demand from quarter-end pension fund rebalancing begins to fade. The timing of today’s pullback also fits with our expectation of a retest. Lows following a relief rally are usually tested within the first two weeks and the technical characteristics of the 3/13 low were relatively uninspiring. At this point, there’s no reason not to expect a ‘successful’ retest, but closing levels below 5500 would open the door to support in the 5125 range. An intraday lower-low (below 5520) with momentum divergence signals and close above 5520 would be the most bullish retest scenario. If there’s no retest, the SPX will need to clear 5910 in our view to repair the technical damage and reestablish a bullish trend. During periods of perceived change, it’s even more important to focus on the signaling of markets rather than opinion.