Market Recovery Signals: BTG Advises Caution as Stocks Rebound
The recent market rout triggered some tactical buy signals, leading to a recovery in stocks and clawing back of losses. However, BTG strategists believe that the bounce may have peaked, urging investors to lighten exposure within the S&P 500's 5400-5440 range.
According to BTIG, a final durable low is still expected, as past drawdowns of 5%+ have typically seen a breadth washout. Despite some positive signs, such as put/call ratios returning to April levels, market sentiment remains mixed. The NAAIM exposure index suggests that active investment managers are still heavily exposed, indicating potential for further downside.
On the sector front, consumer stocks are weak while defensive stocks are near highs. BTIG maintains a positive outlook on real estate investment trusts (REITs) but views homebuilders as vulnerable. Small-cap stocks, like the iShares ETF (IWM), are advised with caution until key resistance levels are reclaimed.
In terms of commodities, gold is poised for a breakout as the GLD ETF consolidates near $225. Overall, investors should remain vigilant as market volatility persists and potential opportunities arise in various sectors.