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S&P 500 must beat ‘this level’ to escape downtrend: Krinsky

on Aug 8, 2022
  • Jonathan Krinsky explains the significance of a close above 4,231 on SPX.
  • The benchmark index is currently trading about 90 points below that level.
  • Several headwinds could make it difficult for S&P 500 to beat that resistance.

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Remain “cautious” on the U.S. equities until S&P 500 closes above the 4,231 level, says Jonathan Krinsky. He’s the Chief Market Technician at BTIG.

Why is that level of importance?

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The benchmark index started the year at 4,796 and made a low of 3,666 in mid-June. Historically, Krinsky said on CNBC’s “Halftime Report”, a close above the “arithmetic mean” of the two (4,231 level) suggests the trend is changing in favour of the bulls.

Since 1950, we’ve never seen a market that’s gone down 20% or more on a closing basis, reclaim 50% of that decline, then go on to make a new cycle low. So, a close above 4,231, historically speaking, would be pretty significant.

He, however, questions if the SPX would indeed be able to crack that resistance, especially since it’s currently trading at above-average valuation in the face of a Fed that’s expected to remain hawkish after the strong jobs report last week.

A rally straight up is not on the cards

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The U.S. economy is already in a “technical” recession and the impact of the recent rate hikes is yet to reflect on the equity market. That also paints a troubling picture for stocks moving forward.

So, even if the benchmark S&P 500 index does meaningfully break above the 4,231 level on a closing basis, Krinsky added, it wouldn’t mean an “all clear” for a rally straight up.

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It doesn’t mean you just flip the switch and go all in on the long side. I think it just gives you a frame of reference to suggest maybe the June lows were the cycle lows and you want to get more constructive on pullbacks.


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