Last week, equities witnessed a relief rally, as major indices like the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, recovered following a three-week dip from their year-to-date highs.
But generally, it was a tumultuous week for the stock market, with indices struggling to stabilize below their 50-day moving averages.
Meanwhile, investor sentiment continued to decline, with levels of bullishness falling below the historical average for the first time, according to the AAII Sentiment Survey.
Piper Sandler analysts said their proprietary breadth measures “remain in confirmed sell positions.”
“Our M.A.C.E trend research confirms this, as 62.4% of stocks are in some form of a downtrend,” they wrote.
Analysts suggest that their 2024 prediction for a High-Level Trading Range (HLTR) is starting to materialize, as major stock indices have dropped below their 50-day moving averages, broken their five-month uptrends, and declined over 5% from their year-to-date highs.
“We expect the SPX to fluctuate between 4,800-4,600 on the low end and around 5,100 on the high end for several months to come,” Piper Sandler’s team predicted.
“With the major indices below their 50-day MAs and the “Sell in May” mantra looming, we favor being more tactical during another busy earnings week ahead of Friday’s unemployment report,” they added.
In the coming days, earnings announcements are expected to take center stage, analysts said, as the Federal Open Market Committee (FOMC) will likely maintain the Fed Fund rates steady at 5.25%-5.50%.
As the week concludes, investors will be keenly awaiting new unemployment data.