Equal-weighted SPX now nearing intermediate-term support

Trends failed to show much evidence of reversing course after the early 3% gap-down and coincided with strong selling globally across many Equity markets. While a 4% SPX decline normally is followed by a rebound in the following session, it’s important to see some semblance of stabilization in Equities sooner rather than later, given the extent of this selloff. Gold, Treasuries and the Japanese Yen acted like safety trades on Thursday, while the US Dollar and Crude oil were hard hit. While it’s still hard to argue for capitulation given the lack of an extreme overbalance in downside volume, the Equity Put/call spiked to 1.33 into Thursday’s close while the spot VIX now lies 7 percentage points above the 3-month futures contract. Overall, I view the risk/reward as being favorable for US Equities given SPX having pulled back to my 5375-5425 target while Equal-weighted SPX lies near intermediate-term support. However, it’s necessary to see a reversal immediately to avoid momentum and breadth getting even more negative.

Equal-weighted SPX, as shown below, now lies near intermediate-term trendline support while pulling back to just above prior peaks from late 2021.  This is an important area and will need to be held in the days to come.

Invesco S&P 500 Equal Weight ETF

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