S&P 500 Heat Map Shows AI Selloff Beneath Defensive Strength
It’s not a good sign when defensive sectors such as healthcare and consumer staples are the index leaders. But that’s the case today because AI and semiconductor names like INTC (-9.18%), MU (-7%), AMD (-5.10%), AVGO (-3.98%) and LRCX (-4%) are all getting hit after a strong couple of days. This could be viewed as profit taking, inflation pressure, rising oil and worries around possible government intervention in AI profits. ORCL (-5.49%) is also caught in the unwind and TSL (-4.06%) looks like a mix of broader de-risking and caution ahead of Musk’s China trip.
But healthcare is easing the losses in the Index with GILD up around 3% and LLY up 2.79%. But these ebb and flows are all part of the market moves in a bull trend and shouldn’t be too worrying for traders.
US Inflation Reaccelerates as CPI Tops Forecasts
US CPI is slightly above forecasts, posting a 3.8% increase in May. This is sticky. It strengthens the higher for longer narrative, cornering the Fed as the US 10 Year yield approaches 4.5%. Indeed, this is a short-term headwind for the S&P 500.
US YoY Inflation Rises to 3.8%, Keeping Fed-Cut Hopes Under Pressure
S&P 500 Cracks as Market Breadth Below 50%
Finally the cracks of the market breadth are starting to show as the S&P 500 Index has a down day that is over 50 bps. There’s a little over 40% of S&P 500 stocks that are over its 20-Day MA so there’s still some room to go before any real capitulative downward move. But if this market breadth indicator were to quickly flip back above 50%, that’s a huge sign of how resilient this market is.
S&P 500 Renko Pullback Tests Short & Medium Term Support
The bearish divergence from what the z-Score SMA was signalling is finally kicking in. The Supertrend has flipped negative and the Renko bricks are now heading towards 50-SMA support. The pullback seems as though it can continue as both the RSI and Z-Score SMA has more room to move lower. Nonetheless the overall trend is still upwards as there are many Renko bricks to go for the S&P 500 Index to reach the 500-SMA.
12-Brick Renko Shows S&P 500 Cooling After Strong Upside Run
Bias: Positive
Support Levels: 7,100, 6,625
Resistance Levels: 7,450, 8,150
Medium Term Path: The road for the S&P 500 is still higher despite this downmove. Indeed, there is a bit of choppiness but all this is part of market movements. It can’t go up everyday. Or it shouldn’t go up everything then that’s a true sign of market exuberance. For now, 7,100 is the medium term support level. Once breadth stabilizes and the z-Score SMA starts to trend higher we can see a return to the 7,450 resistance level.
