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Morning Notes — Near Term Expectations for the SPX

Near Term Expectations for the SPX

August 11, 2020

Last week, the S&P 500 broke through another consolidation zone, filled the downside gap from February 24 and ready to test the all-time high of ~3390.  Look for the S&P 500 (SPX) to approach 3390 on further improvement in US COVID statistics, with the S&P Value Index (SVX) outperforming.  However, I expect both indices will lose momentum and the SPX will fail to break through on its first attempt.  Strong technical support for the SPX exists in the previous consolidation zone of ~3120-3200, which seems like a place to potentially add equity exposure especially when you consider: 1) 10-year bond yields are at ~0.60%; 2) money supply is growing at 22% year-over-year; 3) global PMIs are in expansion territory and rising; 4) equity positioning remains light and; 5) bearish equity sentiment remains elevated.

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