UBS Fears False Dawn In Stocks: "We Don't Have The Sentiment For A New Breakout"

While asset-gatheres and commission-takers are celebrating the record highs in stocks - after the world did not end last weekend - UBS Technical Analyst team is a little less sanguine, fearing that this move to new record highs in the S&P could well be another false breakout due to a lack of sentiment signals in derivatives-land, and breadth breaking down.

On the one hand, the SPX is making marginal new all-time highs but on the other hand, we have the very steep 2016 bull trend underpinning the market coming under pressure to further deliver - if not break this trend.

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Taking into account the very low CBOE put/call ratio...

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And, in the historical context, still quite high SKEW/VIX ratio...

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We still see a high likelihood for a second corrective pullback into early October; in this case we would see the SPX breaking its 2016 bull trend, which at least short-term would produce some kind of market volatility.

Additionally UBS notes that VIX is still around its 24-year low, which should cap the market on the upside. More importantly, with a marginal new SPX high we would very likely see the VIX index not marking a new low, which would be per definition a divergence, which tactically would be toppish instead of expecting a new broad-based breakout campaign.

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