US Equities Expect More Bearish Tone Again

S&P 500 remains under pressure with daily MACD momentum threatening to turn lower. Key remains a cluster of supports including the 63-day average and 38.2% retracement of the February/March rally at 4455/38, below which can see a more bearish tone emerge again, economists at Credit Suisse report.

Break above 4520/25 needed to ease the immediate downside bias. With daily MACD momentum now threatening to cross lower, downside pressures look to be building again.

A close below 4438 would be expected to see bearish pressures increase further with support seen next at 4434 ahead of the 50% retracement at 4376. Whilst we would look for an initial hold here, below in due course should see a move to the 61.8% retracement at 4314.

Resistance is seen at 4506 initially, with a break above 4520/25 needed to ease the immediate downside bias for strength back to 4559/61, then the recent high and potential downtrend at 4593 and 4610, respectively.

On the other hand, bond markets and the S&P 500 are too optimistic about the economic outlook, according to Morgan Stanley’s chief U.S. equity strategist. “We have another example of extreme divergence between the internals of the stock market which are strongly indicating a growth scare, while bonds and the S&P 500 are suggesting growth is not only ok, but likely to remain robust in the case of bonds,” Michael Wilson and his team wrote in a note to clients on Monday. This deviation will prove unsustainable, and cyclical stocks are the most vulnerable when it’s eventually resolved.