April 8, 2020
Yesterday’s late afternoon fade in the S&P 500 had the index closing at 2659, which just happens to be inside our previewed technical resistance zone of 2650-2665. But the fade into the close probably looked worse than it felt as sector dispersion favored cyclically-sensitive groups and still does this morning. Recall our January warnings about the unsustainability of record highs in the S&P 500 based on defensive sector leadership/lack of cyclical sector confirmation. Market internals like this tend to lead broad market behavior by several days and the current two-days (three if we count today) of cyclical sector leadership could be something more than an interesting observation. Something to watch in the days ahead, despite our fundamental opinion on bond yields. Bond yields reflect market expectations of inflation or growth and cyclical sectors respond to bond yields for that reason.