Image Source: Pexels

S&P 500 buyers weren't really present yesterday, and the session finally finished on a strong, one-sided bearish note, with all four conditions of mine met. Copper seemed to be foretelling a down-day yesterday, and it ended up correct. The many bearish medium-term signs, as described in my latest analyses, are raising their heads.

Aftermarket action didn't bring any retracement attempt to speak of – instead, sellers retook initiative and the 4,154 level turned into resistance. Also, real assets appear to confirm this is still a risk-off environment, as illustrated by TLT's jump higher.

Last but not least, UK inflation data isn't an isolated occurance of persistent core figures – US stocks still have to tackle the Fed tightening with lengthy pause vs. easing disconnect, the onset of a genuine recession in Q3, LEIs declining for 13 months in a row, shrinking M2, deposits outflow hampering commercial lending, the downward path of real estate, all while unemployment claims pick up and Treasury starts issuing fresh debt to replenish TGA.

This is hardly a bullish cocktail. Don‘t forget NVDA's earnings and the likely disappointment of not living up to the AI hype and chase. Quoting from yesterday‘s long analysis:

"...Big Tech is ignoring the glaring disconnect to TLT – these two usually go hand in hand, but GOOGL, MSFT, and AAPL with NVDA are still holding up. Talking the last two, there is some short-term technical vulnerability (as in suspect series of latest daily candles) showing up, and I wonder how much more nosebleed for NVDA can come following its earnings tomorrow after the close.

"Today is shaping up on a risk-off note, reflecting the poor European manufacturing data that has already pushed many real assets towards my corrective targets. Meanwhile, the long-dated Treasuries outlook is going to change in the following weeks – the run higher will be though more muted than otherwise would have been thanks to the Fed no longer being the buyer, and Treasury General Account replenishment needs following debt ceiling resolution, which would work to suck some liquidity off the market place.

"Recession is to start in Q3, and the consumer is getting increasingly into hot water. With household debt over $17T, credit card debt not really retreating (revolving credit up 17% in Mar annualized), the stress is showing in XRT and recent earnings calls from WMT, TGT... leaving AMZN not immune either, methinks.

"Don‘t forget that the LEIs I mention so often have been declining for 13 months in a row, and show no sign of turning. Fed isn‘t happy about the GDP, real estate or job market status as relates its larger inflation fight. Stock market sellers are to retake initiative once this rally runs its course."

Let‘s move right into the charts.

S&P 500 and Nasdaq Outlook

Charts are courtesy of StockCharts.

The 4,154 level is now resistance, ideally to hold on the closing basis. Dip buying is thought to emerge first – bulls aren't going to give up without any intraday fight, even with a lack of positive debt ceiling news. A breach of the 4,136 level followed by the 4,115 level are the key objectives. Reaching these would take a while, and perhaps also Friday‘s core PCE coming in at least 0.3%.

It is essential to note how more weakness is being witnessed in the banking, industrials, materials, retail, and small-cap sectors.

Gold, Silver, and Miners

Gold repelled the immediate danger at the $1,930 level, and so did silver in regards to the $23.15 level. The next few weeks will show whether these come into jeopardy again or not, as this week‘s lows are in.

More By This Author: