Are U.S. Stocks Headed for a Deeper Pullback? Fairlead Strategies Report Suggests Potential Weakness Ahead
In a recent report by Fairlead Strategies, concerns have been raised about potential weaknesses in the U.S. stock market, with the S&P 500 at risk of a deeper pullback in the coming weeks. The research firm, known for its technical analysis expertise, has pointed to a noticeable weakening of short-term momentum, as indicated by the daily Moving Average Convergence Divergence (MACD) indicator.
According to the strategists at Fairlead, the SPX has seen a notable decrease in short-term momentum, putting it at risk of a deeper pullback over the next 2-6 weeks. Initial support levels are currently around 5430, but there is a possibility of a retest of the next support level near 5200. This loss of momentum is not limited to the S&P 500, as small- and mid-cap benchmarks are also being affected.
Fairlead also highlighted the significant decline in Japan's Nikkei, which has dropped over 5% this week, leading to negative adjustments in short-term indicators. There is a concern that the Nikkei may retest its key support level around 34,000, indicating a potential period of range-bound trading for Japanese stocks in the coming months.
On the commodities front, crude oil has shown signs of a potential rebound, with a new short-term oversold 'buy' signal suggesting stabilization above the December low of approximately $69 per barrel. Analysts are closely watching whether WTI crude oil can reclaim support near $75 per barrel, as failure to do so could lead to a significant downturn, resolving a long-term triangle pattern to the downside.
In conclusion, investors should be wary of potential weaknesses in the U.S. stock market and Japanese stocks, while also keeping an eye on the commodities market, particularly crude oil prices. Understanding these market dynamics and being prepared for potential pullbacks can help investors navigate uncertain times and protect their investments.