Jonathan Krinsky doesn’t see the all-clear to buy stocks just yet. BTIG’s chief market technician warned Sunday that, while the pullback early last week generated some “tactical buy signals,” he thinks the “bulk of the bounce has likely run its course and [we] would use strength … to lighten exposure.” The S & P 500 had its worst session since 2022 to start last week, as U.S. economic growth fears and the unwind of a popular Japanese yen trade pressured equities. However, the broad market index clawed back most of that decline by Friday, posting a weekly loss of just 0.04%. Despite the late-week improvement, Krinsky advised clients to ease equity exposure around the 5,400 level on the S & P 500 , which closed at 5,344.16 on Friday. .SPX 1M mountain SPX 1-month chart “A final durable low is likely still ahead of us,” Krinksy said. “We are hard pressed to find a 5%+ SPX drawdown that ended without seeing a breadth washout (less than 20% of components above the 20 DMA). It only got to 31% last week, so unless it’s different this time, we should expect another leg lower to fully wash out breadth.” Others on the Street echoed Krinsky’s sentiment: Eric Johnston, chief equity and macro strategist at Cantor Fitzgerald: “We continue to believe that equities will be in a downtrend, with significant realized volatility along the way. We think the headwinds for equities include a slowing economy, earnings estimates that present a high bar and are in decline, valuations that while lower than 1 month ago remain too high, positioning of the individual investor that is very extended, and a continued seasonally challenging time of the year.” Mislav Matejka, head of global equity strategy at JPMorgan: “We remain concerned about the backdrop for stocks; there could be further bouts of weakness as we progress through summer. Activity is weakening, negative earnings revisions resumed, concentration risk and geopolitical uncertainty are elevated.” But some were more sanguine on the market going forward. Lori Calvasina, head of global equity strategy at RBC Capital Markets, is “optimistic that a short-term bottom was put in place, or came close to being put in place.” Scott Rubner, tactical specialist at Goldman Sachs, noted the bottom is not in yet, “but we are close and I am starting to ‘nibble.'” The big event this week will be the release of the consumer price index reading for July, due Wednesday. Investors will also get July retail sales data, which will give clues on the state of the consumer. Elsewhere on Wall Street this morning, Deutsche Bank upgraded Eli Lilly to buy from hold. “LLY’s 2Q24 big beat and raise in our view helped settled some nerves in a volatile macro backdrop,” the bank said in a Monday note. “We see LLY stock outperforming for its high growth outlook and low beta,” the Deutsche analyst added, while calling the drugmaker a “low beta/high growth unicorn.”
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