S&P 500 recently triggered a golden cross: is a rally coming?

S&P 500 is already down about 5.0% versus its year-to-date high but a technical strategist says the prospect of further downside isn’t off the table just yet.

Jason Hunter’s reasons to remain dovish

That’s an interesting call since the benchmark index recently triggered a golden cross that typically signals an upcoming rally. Still, Jason Hunter of JPMorgan said today on CNBC’s “Closing Bell”:

We incorporate a macro overlay because these signals don’t operate in a vacuum. When we think about the yield curve, markets now projecting rates to more than 2x the theoretical neutral, odds of a signal failure are pretty high here.

Also on Thursday, the U.S. Labour Department said initial jobless claims edged lower last week that creates more room for the central bank to keep rates higher for longer.

A key level to watch in the S&P 500 index

According to Jason Hunter, around the 3,900 level on the S&P 500 is of utmost importance as a meaningful break below that price could result in accelerated decline in the coming weeks.

Today, you can see the market trying to bounce from that key area but we think the pressure increases on the downside. Even if we bounce over the near term, we’re expecting eventual break and an acceleration to lower price levels.

Last week, a new research said the FOMC may have to lift interest rates to well over 6.0% to cool prices. It also raised doubt on the Fed’s ability to orchestrate a soft landing.

At writing, the equities market, nonetheless, is up 4.0% versus the start of 2023.

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