September 9, 2020
We continue to view the recent pullback in the SPX as a pause rather than the beginning of an immediate, deep correction. Market tops aren’t usually made on accelerating price momentum, broad sector participation and still-elevated bearish sentiment. Market tops typically include internal divergences and decelerating momentum indicators. Those conditions existed in late January, not last Wednesday. Expect a retest in coming weeks if the SPX gets through ~3480. And expect an easier time for value/cyclical sectors where positioning isn’t crowded and valuations remain below historical averages.