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“Essentially the ‘buy the dip’ trade appears to be losing its luster,” they wrote in a note.
The analysts argue that the momentum in technology and other high-beta sectors is rolling over shortly after breaching significant support levels.
“While there are likely to be bounces along the way, we see little reason to jump in here.”
From the macro perspective, they highlight the rates and the U.S. dollar as key risks for stocks. On Thursday, the benchmark 10-year yields reached 4.312%.
“As is often the case, it’s usually the velocity rather than the absolute level. 10yr yields remain stubbornly over 4.20%, and very close to their October ’22 intraday high of 4.33%. A quick run through those highs would likely be a risk-off signal.”
When it comes to the S&P 500, the technical analysts highlight 4325 as the next destination. In case this is breached, then the re-test of the 4200 breakout level may come into consideration over the next couple of weeks.
S&P 500 futures are up 10 points in the premarket Thursday trading after the index fell 0.8% yesterday.
