S&P 500 correction risks rise on sector rotation
The bear case argued for the S&P 500 is that deteriorating mega-cap tech momentum and technical breakdowns in financial leaders open the window for a deeper market correction.
The argument
The host noted that the Magnificent Seven ETF continues to deteriorate, and major financial stocks have broken to the downside following earnings. This loss of leadership could trigger systematic profit-taking if key technical support levels are breached.
The thesis, stress-tested
✓ What validates it
- ✓S&P 500 futures breaking below the 6,850 to 6,900 technical support zone
- ✓CTAs and systematic traders initiating a profit-taking cycle
▸ Risks discussed
- ▸Bulls remain in control if pullbacks continue to be bought above key support levels
Hear it yourself
"But the newest development is that the earnings on these financial stocks like JPMorgan and Bank of America have started to come out, and the financial sector ETF has clearly broken to the downside attempting to derail one of the sectors has been the leadership over the last few months."
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