March 5, 2020
The S&P 500 is still short-term oversold with high levels of realized volatility capable delivering a test of last Friday’s low. A retest below 2900 could push the CBOE equity put/call ratio back to bearish extremes, but other equity sentiment indicators have yet to signal a contrarian buy signal. Nonetheless, levels below 2900 would be considered a technical entry point, especially with accompanied price-trend exhaustion in the most cyclical groups (using indices, not ETFs). Unfortunately, bond yields will be of little use given the convexity hedging dynamic we discussed yesterday. And bond yields will likely remain under pressure until US coronavirus case counts decelerate.