February 25, 2020
The S&P 500 has slipped into our 3150-3210 range of strong technical support (December breakout range). Closing levels much below ~3150 would challenge the bullish short-term technical picture and could push out expectations for new record highs in the second half of 2020. Treasuries continue what looks like a massive ‘blow-off rally’ to a current 10-year yield of ~1.32%. This fits with expectations for a potential exhaustion level near ~1.29%. If we’re wrong (don’t think so) and both asset classes extend further, we’ll watch for eventual price trend deceleration and extreme bearish equity sentiment for signs of a sharp reversal. I know the bearish narrative, but there’s far too much monetary and fiscal fuel in the pipeline for short sellers to remain patient.