Investing.com — The near-term outlook appears “unfavorable,” BTIG said in a Sunday note.
The benchmark index has managed to maintain modest gains as October nears its end, but BTIG anticipates potential market turbulence around the upcoming US elections.
“We continue to view risk/reward as poor in the coming weeks,” Jonathan Krinsky, Chief Market Technician at BTIG, said in a note.
“We believe that we will either see a shakeout before the election or, if the bulls plan to rally before the election, the chances of a ‘sell the news’ on the event are high in our view. ”
Put another way, Krinsky believes the likelihood of a negative market surprise, or “trick,” is greater than that of a positive outcome, or “treat,” in the coming weeks.
The next two weeks will be particularly eventful, with major earnings reports, macroeconomic data releases, the US elections and a meeting of the Federal Open Market Committee (FOMC) on the horizon. These events are seen as potential catalysts that could move the market in either direction.
In its note, BTIG also highlighted recent moves in the bond market, noting that 10-year Treasury yields have broken their downward trend and have traded above their 200-day moving average (DMA) in recent days.
While stocks have largely ignored this move so far, “another surge would likely be a clear headwind,” Krinsky noted.
The strategist also discussed the performance of the semiconductor and AI sectors, highlighting that only a few companies have shown significant outperformance in recent years. He points out that if we look at an index with an equal weight of semiconductor stocks, there has been underperformance relative to the broader market over the past three years.
