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Takeaway: Now is a good time to be booking gains in US equities as fundamental tailwinds and upside beta risk deteriorate on the margin.

Has the beta juice been squeezed dry for now? That’s certainly the appropriate question to be flagging here with domestic equities registering immediate-term TRADE overbought signals on our quantitative factoring.

For the SPX specifically, the key levels to watch are:

  • TRADE resistance = 1517
  • TRADE support = 1492
  • TREND support = 1442

In other words, book gains at 1517 and increase exposures at 1492. If the latter level is violated to the downside, there’s no real support to our intermediate-term TREND line of 1442. That would be a great price for those who may have missed some or all of this rally to get involved on the long side – assuming the fundamental research signals remain supportive.

To recap, those signals are: #GrowthStabilizing, #Housing’sHammer, investor rotation out of bond and gold funds, and a [welcomed] lack of headlines out of the Axis of Central Planning in Washington D.C. (White House/Congress/Federal Reserve).

For our latest deep-dive on these factors, please refer to our 2/5 note titled: “IS IT TIME TO HEDGE FOR A SELLOFF ACROSS “RISK ASSETS”?”. For our up-to-the-minute thoughts on the factors that have deteriorated since then and could lead to a modest correction in equities, please review our 2/7 note titled: “JOBLESS CLAIMS & #GrowthStabilizing - ARE WE NEARING THE END OF THE LINE?”.

All told, equities is still our favorite major asset class, but we certainly don’t like them at every price. With respect to the domestic equity market, now is a good time to be booking gains as fundamental tailwinds and upside beta risk deteriorate on the margin.

Darius Dale

Senior Analyst

Overbought: SP500 Levels, Refreshed - SPX