Risk markets rose across the board yesterday as geopolitical tensions did not escalate further over the weekend and risk rebounded from oversold positions. Fixed income investors seemed to choose to stay on the sidelines ahead of Friday's PCE data, the FOMC meeting in 8 days, and the SPX's busiest earnings week of the quarter, with trading activity remaining light despite positive price action, with fixed income volumes at only 60–70% of normal levels. 44% of SPX companies will report this week, including 5 of the "Magnificent 7", with Tesla on Tuesday, Meta on Wednesday, and MSFT, Google, and Amazon on Thursday.
With bonds selling off last week and equities continuing to trade at fairly expensive all-time highs relative to fixed income (based on implied yields), Wall Street believes investors remain comfortable going long, with long positioning indicators reaching 4-year highs ’s highs, while the SPX/Nasdaq short ratio is set to reach near 10-year lows.
However, last week's negative price action still caused some technical damage to the stock, with SPX futures having fallen below the 55-day moving average and more than 5% away from the next 200-day moving average support. On a weekly basis, the slow stochastics have turned negative and accelerated downward, while the SPX monthly candlestick is also likely to form a bearish outside monthly line at a record high, which needs more attention during the earnings season.
In terms of cryptocurrencies, JPM believes that BTC is also overweight based on CME futures contracts, and ETFs have seen outflows for two consecutive weeks (although on a smaller scale), and mainstream momentum has weakened significantly. Inflows rebounded slightly to +62 million USD on Monday, but had no impact on the market. We will continue to pay close attention to market trends.
