Inside Markets — Technical Perspective

The early-August rally in the SPX came with narrow breadth and the recent rotation out of momentum stocks has flowed into defensive sectors. Through a technical lens only, narrow breadth and defensive sector leadership are bearish characteristics that often precede corrective price action. The early August rally and passage of time have lifted trend support for the SPX to the 6250-6290 range, and the bullish trend remains intact unless/until this level breaks. Sustained closing levels below 6250 would only challenge the bullish near-term trend, while a break below pattern support at 6148 would open the door to a correction price action with support in the 5/12 upside gap at ~5750. Pattern support at 6148 fits our ~5% pullback scenario (Tuesday’s edition) if the August Jobs Report (9/5) and August CPI print (9/11) force markets to price out a September rate cut. Pattern support at ~5750 fits our ~10% correction scenario if subsequent data (retail sales, etc.) force markets to unwind expectations for two rate cuts (50bp) in 2025.