S&P 500 Rally Remains Internally Vulnerable

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S&P 500 with yields gyrated wildly on celebrating CPI and ignoring sticky core CPI yesterday, and the buyers won in the end as my four conditions weren’t met, yet market breadth watchers can‘t speak about confirmations really.

Well before the weak bullish momentum from yesterday petered out, I called for the bears to start moving, and they did. BoE rate hikeeven if expected, illustrated the universal problem of a not disinflating fast enough core inflation.

Let‘s bring up my Monday‘s macroeconomic predictions for today:

(…) Thursday‘s PPI would probably underwhelm, and come only a bit above zero, and the core PPI as well. Unemployment claims at 250K seem as a correct expectation

PPI came in line with my expectations while unemployment data were of a more recessionary flavor – and that‘s positive for the sellers. Keeping the big picture in mind, this is still the calm period even if we break below 4,115 soon. Hello PACW – the daily outlook is sure bearish.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 6 of them.

S&P 500 and Nasdaq Outlook

S&P 500

See that miserable “improvement” in market breadth? Each time the buyers come back and win the day, they end up weaker. Talk of a Pyrrhic victory. As I‘ve been always saying, markets are most vulnerable at their narrowest, and that‘s where they are now. The rubber band is very stretched, and would snap back in the opposite (that‘s bearish) direction.


While I had been often talking tech since December as one of the best sectors to be in, I had been highlighting value and Russell 2000 weakness – the degree of underperformance is obvious.

4,150 is merely a first step – 4,136 followed by 4,128 – that‘s the true objective for today. Any time of the bears‘ choosing (properly said, strength on a strong catalyst such as banking fears), it‘s 4,115 and then 4,078 breaks that usher in increasing acceleration.

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