Stocks have had a historic run amid increasingly negative headlines. Historically, stocks have tended to lead the economy, and while a second-half rebound may be likely, some equity weakness over the coming months is also possible. The historically worst six months of the year have officially started, and combined with technical warnings, that suggests stocks may take a well-deserved break soon.
TECHNICAL WARNING SIGNS GROW
In April, the S&P 500 Index had a historic rally off the March 23 lows, gaining more than 31% through April 29. The strength of the move, as well as internal data, suggests that a full retest of the March 23 lows may not be in the cards. While this is encouraging long term, recent price action combined with seasonal headwinds may point to a possible pullback.
The S&P 500’s 20-day moving average has been closely watched by investors in recent months, as the index has traded off the average, first as resistance in late March and more recently as support.
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