April 25, 2022
Technical support for the S&P 500 (SPX) remains in the ~4150 range after holding that level twice during the early- March lows. That level also lines up with the technical floor from last summer. We expected a pullback into the 4,150-4,300 range after the unsustainable attempt to break above ~4,600 in late March. Nearly every current headline reads bearish. Unfortunately, headlines almost always follow price action, and despite obvious shortcomings, broken technical levels provide a more disciplined approach at extremes.
NDX: The NASDAQ 100 (NDX) is nearing similar technical support levels, but outperforming this morning as 10-year real yields move lower. Ten-year real yields touched 0% last Monday before trending back into negative territory to -0.12 today. Real yields (nominal yields – inflations expectations) and growth stock multiples have a strong negative correlation. Of the major US indices, the NDX is the most oversold and has the most to gain from a short-term fade in real yields.