In today’s briefing:
- Short HSI Bear Wedge
- SPX Rally Failure Below 4,200
- Defensive Areas Starting to Lead; 10-Yr Treasury Yield Testing Support at 3.35-3.4%
Short HSI Bear Wedge
- Hong Kong is the weak link in Asia to short. Bear wedge set to break lower after the rally failed under the 21,000 sell resistance. Similar fate for the A50.
- ASX met sub 7,400 zone to trim. Korea 327 sell zone, starting to unwind. NKY 28,300-500 sell zone at hand.
- A number of markets are approaching sell levels in Asia and Europe. Does the SPX rise may fall short of 4,200? Third week in April is when bull energy dissipates.
SPX Rally Failure Below 4,200
- Compelling intraday reversal that kissed 4,177. Concern over an early fade below 4,200 was justified and formed a dual top. Fade below 4,165 was negative and used to sell.
- Growth concerns overshadowing lower inflation (transitioning) and this is a theme that we expect will expand over the summer along with the next round of bank failures/ripples and systemic risk.
- Cycle: May/June a more negative cycle. Second half of April is when bull energy dissipates and starts the turning process.
Defensive Areas Starting to Lead; 10-Yr Treasury Yield Testing Support at 3.35-3.4%
- Since late-January/early-February we’ve recommended shifting to defensives considering our belief that 4165-4200 will cap upside on the $SPX in 2023, while also conceding that a reach to 4300-4325 is possible.
- Considering limited upside in both scenarios, we continue to recommend shifting to defensives and believe that now is the time to be tactically overweight defensives
- Defensive Sectors including Health Care (XLV), Utilities (XLU), and Staples (XLP) are hitting 2+ month RS highs, and are staging bullish price and RS reversals, as are gold miners (GDX).
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