February 13, 2023

Chart analysts say the S&P 500 is hovering at a level that points to more downside

The S & P 500 just suffered its worst week in nearly two months, stalling at a technical level that concerns many chart analysts. The equity benchmark lost 1.1% last week for its weakest weekly performance since December as investors assessed the Federal Reserve’s path for rate hikes. The loss put the S & P 500 below 4,100 at the end of last week, cutting 2023 gains to about 7%. .SPX YTD mountain S & P 500 “The SPX broke out above 4,100 in early February, but closed below it last week. That creates the potential for a ‘false breakout,'” said Jonathan Krinsky, chief market technician from BTIG, in a note. “This comes as momentum is rolling over, rates and the dollar are breaking out, we are entering a seasonally weak period.” Veteran trader Art Cashin, director of floor operations for UBS Financial Services at the New York Stock Exchange, said last week that he’s skeptical the rally has legs. He cautioned that if the S & P 500 breaks below 4,100, there could be more downside. The technical weakness came after the S & P 500 gained 6.2% in January, notching its best start of the year since 2019. January is seen as a key barometer for the full year , but many believe that the solid performance ate up a good deal of the strength of the first quarter. “After one of the strongest starts to the year for equity markets, we are starting to see fatigue set in,” said JC O’Hara, chief market technician at Roth MKM. “Tactically plenty of our studies suggest a pause / pullback is likely in order to reset out of overbought territory. We will be monitoring the quality of the back and filling process.” Javed Mirza, Canaccord Genuity’s technical analyst, said a new short-term “corrective phase” is underway in equity markets as the S & P 500 triggered daily “mechanical sell” signals and reached overbought conditions. “Equity markets are showing signs of stalling, consistent with a new intermediate-term (1-2 month) corrective phase taking hold,” Mirza said. “An intermediate-term corrective phase has downside potential to the December lows on most North American equity indices.” The S & P 500 rose 0.8% on Monday, taking the benchmark above the 4,100 level.

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