Fairlead Strategies is out with a report today that sees 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, which is focused on technical analysis, points to a notable weakening of short-term momentum as evidenced by the daily Moving Average Convergence Divergence (MACD). This is a technical indicator used to gauge market movement.
"The SPX has seen short-term momentum weaken notably per the daily MACD, putting it at risk of a deeper pullback over the next 2-6 weeks," the strategists wrote in a note.
"Initial support is ~5430 per the cloud model, which we think is in jeopardy for a retest of next support near 5200. The loss of short-term momentum is widespread, also affecting small- and mid-cap benchmarks."
Fairlead also noted that Japan's Nikkei 225 has experienced a significant decline of over 5% this week, leading to a negative adjustment in short-term indicators. This has brought into focus the possibility of the Nikkei retesting its key support level, currently around 34,000.
A long-term gauge deterioration indicates that Japanese stocks are likely to enter a period of range-bound trading. This period could last several more months, even as they maintain their secular uptrend, Fairlead added.
In the commodities market, Crude Oil WTI Futures has shown signs of a potential rebound. A new short-term oversold 'buy' signal suggests that there could be stabilization above the December low, which is approximately $69 per barrel.
Analysts are monitoring whether WTI can reclaim support near $75 per barrel. Failure to do so could lead to a significant downturn, resolving the long-term triangle pattern in crude oil's pricing to the downside, the research firm further noted in its report today.