S&P 500 Faces Resistance, BTIG Sees Potential for a Pullback
BTIG analysts have shared their views on recent market movements, noting that the S&P 500 Index (SPX) has returned to a downward trend from its all-time high. Following a challenging end to 2024, market bulls have experienced some recovery; however, BTIG warns that the index may pull back from its current position.
Analysts led by Jonathan Krinsky indicated in a note that a steady close above approximately 6025 points could signal a move towards testing the all-time high around 6100 points. Conversely, if this level cannot be maintained, a re-test of the previous week's lows near 5830 points might be on the table.
The analysts stated that the rise in the U.S. dollar has stalled, but that bond markets continue to remain weak, posing significant risks in the event of a potential increase in bond yields. The Semiconductor ETF (SMH), representing the semiconductor sector, is attempting to move out of its recent trading range while filling a price gap remaining from July of last year.
Additionally, there are speculations that Jensen Huang's upcoming keynote at the Consumer Electronics Show (CES) could trigger a 'sell the news' event. Regarding the tech-heavy Nasdaq 100 Index (QQQ), BTIG notes that the index appears to be re-testing a previously broken trend line from the August lows and seems to have moved out of the downward trend stemming from recent highs. Still, should bears stage a resurgence, they may likely do so at current levels.
Small-cap stocks have also returned to a resistance level, and BTIG states that a move above approximately 226 points would be a positive development for this segment. Meanwhile, 30-year real interest rates have reached new cycle highs, approaching the peaks seen at the end of 2023. This increase in interest rates has primarily posed challenges for certain market sectors, yet there are concerns regarding how a further rise above 2.60% could affect large-cap stocks. Analysts also observe that the iShares 20+ Year Treasury Bond ETF (TLT) is moving toward the November 2023 gap at 85.12.
The U.S. Dollar Index (DXY) is showing signs of a potential reversal, which BTIG views as a positive sign; however, they believe that it must drop below approximately 107 to confirm a peak. Finally, the materials sector has experienced a modest recovery following historically oversold conditions and a pullback in the dollar. However, the recovery has remained minimal, and BTIG expresses a cautious outlook, stating their expectation for an upward counter-trend move while acknowledging that the sector is testing their patience.