SignalPlus Macro Analysis (20240423): The U.S. stock market awaits corporate earnings data.

The geopolitical situation did not escalate further over the weekend, and oversold positions led to a risk rebound, with risk markets rising across the board yesterday. Ahead of Friday's PCE data, the FOMC meeting in 8 days, and the busiest earnings week of the quarter for SPX, fixed-income investors appear to be taking a wait-and-see approach, with trading activity remaining relatively light despite positive price movements. Fixed-income trading volume was only 60–70% of normal levels. 44% of SPX companies will report earnings this week, including 5 of the "Magnificent 7." Tesla will report on Tuesday, Meta on Wednesday, while MSFT, Google, and Amazon are scheduled for Thursday.

With last week's bond sell-off, stocks remain at historically expensive levels relative to fixed income (based on implied yields). Nevertheless, Wall Street believes investors remain comfortable going long, with long-position indicators reaching a 4-year high, while the short ratio for SPX/Nasdaq is at a near 10-year low.

However, last week's negative price action still caused some technical damage to stocks. SPX futures have fallen below the 55-day moving average, with the next support level at the 200-day moving average still more than 5% away. On a weekly basis, the slow stochastic has turned negative and accelerated downward, while the SPX monthly candlestick may form a bearish engulfing pattern at record highs. Caution is advised during earnings season.

In the cryptocurrency space, JPM believes BTC positions are also overextended based on CME futures contracts, while ETFs have seen outflows for two consecutive weeks (albeit small ones), with mainstream momentum clearly weakening. Monday saw a slight rebound in inflows to +$62 million, but it had no impact on the market. We will continue to monitor market developments closely.