BTIG analysts provided insights into the recent stock market movements, observing that the S&P 500 Index (SPX) has returned to the downtrend line from its all-time highs. After a challenging end to 2024, market bulls have regained some ground, but BTIG cautions that the index might initially retreat from its current position.
A decisive close above approximately 6025 points could signal a move towards testing the all-time high of around 6100 points, analysts led by Jonathan Krinsky said in a note.
Conversely, a failure to maintain this level could result in a retest of the previous week's lows near 5830 points.
The analysts noted that while the U.S. dollar's rise has paused, bond markets remain weak, posing a significant risk in case of an uptick in bond yields. The semiconductor sector, represented by the Semiconductor ETF (SMH), is attempting to break out of a recent trading range and fill a price gap left from July of last year.
However, there is speculation that the upcoming keynote speech by Jensen Huang at the Consumer Electronics Show (CES) could trigger a 'sell the news' event.
In terms of the tech-heavy Nasdaq 100 Index (QQQ), BTIG points out that it is retesting a previously broken trendline from the August lows and has seemingly broken out of the downtrend from recent highs. Nonetheless, they suggest that if the bears are to make a stand, it would likely be at current levels.
Small-cap stocks have also returned to a resistance level, with BTIG indicating that a move above approximately 226 points would be a positive development for the segment. Meanwhile, the 30-year real interest rates have reached new cycle highs, approaching the peaks seen in late 2023.
This rate increase has been a challenge primarily for specific market sectors, but there is concern about how a further rise above 2.60% might affect large-cap stocks. The analysts also observe that the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) is moving towards its November 2023 gap of 85.12.
The U.S. Dollar Index (DXY) shows signs of a potential reversal, which BTIG views as a positive sign, but they believe it needs to fall below approximately 107 to confirm a peak. Lastly, the materials sector has seen a modest recovery following historically oversold conditions and a pullback in the dollar.
However, the recovery has been minimal, and BTIG expresses a cautious outlook, expecting a counter-trend move upwards but acknowledging that the sector is testing their patience.
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