Morning Notes — S&P 500 at Support

The S&P 500 (SPX) trades to predetermined initial support in the 4200-4250 range after price trend deceleration early last week signaled a pullback. The lack of material weekly deceleration and an absence of heavy distribution patterns increases confidence that near-term support will hold. As such, near-term pullbacks should first be considered buying opportunities, while a break below ~4,000 could trigger popular momentum sell signals used by many systematic strategies (CTA etc.) Look for reversals in the 4200-4250 range after a period of base building in the coming week(s).   

Sectors: Our preference to add equity exposure in cyclical/value sectors has been on hold for the past ~2 weeks after the 5/30 yield curve broke under ~120bps. A widening out beyond that level (now 113.5bps) would trigger renewed interest and would likely start with a reversal in bond yields.