Stocks trading over their 50-day moving averages recently crossed up through their EMA 10, bouncing up from extreme lows (near 5%) not seen early 2009 near the market lows. Put/Call remains cautiously high (a contrary indicator) while the indices base near their February lows.
Sector-wise, our biggest disappointment rests with financials. Their price relative vs. SPX remains in a downtrend and portends risk to this rally. Related to financials, credit spreads in corporates vs. Treasuries are expanding; corporate bonds price relative vs. Treasuries has been weakening and in the past has foreshadowed weakeness in equities.
A curious positive divergence is industrial metals price performance (as seen by copper) vs. bonds. Although copper prices have been falling and bonds rising, RSI has recently favored copper, pointing to a possible short-term trend change.
With these mixed signals, we are not anticipating a particularly strong bounce from current levels. Our high-probability SPX target is 1115-1125 (Friday's close was 1091), or 3% higher.
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