S&P 500, and Dow Jones Print lower, Retailers unwinding longs
Traders are cautious of adding to their net longs on major U.S. indices. They are now liquidating stocks of high-flying tech stocks for value stocks that may profit from the current fiscal and coronavirus vaccination programs. They are now cutting down their position as the IG Client Sentiment (IGCS), which tracks retail investors' positioning, hints of further weakness in the stock market. Typically, a contrarian indicator, it nonetheless indicates traders who are not confident of indices, concerned about a correction correcting what analysts say is an overvalued market.
Even though a minority of retailers are net-long on major indices—of which the IGCS could suggest shorts, indices remain fragile and risk posting even more losses. The opportunity cost of pumping markets into the riskier stock market than the more stable and risk-free but competitive bond yields force some to reconsider, impacting the stock market and therefore indices. While the 10-year notes of major economies are leveling out, the divergence--especially with the U.S.'s and insinuation of what the bond market predicts of the FED fund rate, may further pour cold water on the uptrend, clipping bulls' wings.
Impact on indices:
Bearish. Fundamental events are a mixed bag. The FED is optimistic, urging for more financial support even if the economy is overheating with real inflation fears. Rising bond yields point to a possibility of higher Fund rates, locking the sluices of cheap money, weaning S&P 500 and the DOW Jones bulls.
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