With a shock oil production cut now under investors’ belts, attention is shifting to data, chiefly Good Friday’s jobs numbers, which could provide the next big catalyst for equities as earnings season looms once again.
JPMorgan, though, will not be steered from its bearish path. The bank kicked off the week by saying U.S. stocks were not worth the risk, and strategist Marko Kolanovic has now doubled down with a fresh warning:
“We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months,” he said late Monday. While his is hardly the only cautious voice on Wall Street, note Kolanovic was a bull for much of 2022, which ended up being a terrible year for stocks.
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Where stocks go from here is all down to a few key levels, says our call of the day, from money manager Grindstone Intelligence.
Austin Harrison, chief market strategist of the Kansas City-based outfit, says that for much of 2023, whether to buy stocks or sell them and find alternative investments has been a near impossible call, even after major indexes have bounced off October lows.
For that reason, technicals matter a lot right now, he says.
“The S&P 500 SPX,
If the S&P 500 can rise above those February highs, Harrison said he’ll be much more convinced of a new bull market under way.
It’s a similar story for the Nasdaq Composite COMP,
Harrison said that the Fibonacci level for the Nasdaq also marks the point where “growth stocks peaked relative to value. In September 2020, growth stocks, which dominate the Nasdaq, ended a near 15-year run of outperformance relative to value,” he said.
While another strong week like last one’s will put those big indexes above Grindstone’s key levels, he is still wary of weak breadth — when the number of declining stocks are above those gaining.
The strategist points out that most stocks have lagged behind index returns this year by a sizable margin — the S&P 500 has outperformed the equal-weighted index by around 6% since mid-January. That may be nothing to get too alarmed about as it simply means biggest stocks — growthy ones — are rising faster than smaller ones, said Harrison.
One piece of good news lately — the Dow industrials DJIA,
But bottom line, the strategist is staying neutral on stocks until the S&P 500 is above 4,200 and the Nasdaq has “comfortably cleared” 12,220 — opening the door to “higher stock prices.”
“That doesn’t mean we need to be indiscriminately buying everything we see — we still want to be selective. But unless the situation in value deteriorates further, there just isn’t much technical evidence to support a bearish approach.”
Read: What ‘unprecedented’ volatility in the $24 trillion Treasury bond market looks like
Read: Soaring oil prices: 6 things investors need to know about the surprise OPEC+ production cuts
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