From BTIG’s Jonathan Krinsky this morning.

Always an interesting take on a Sunday.

Nowhere to Hide

Bond Market Repricing Adds to Equity Headwinds

WHAT YOU SHOULD KNOW:

The S&P 500 is now firmly below its 200 DMA, and testing its 4Q low of 6521. Anecdotally we still get the sense that participants are more worried about missing the 'de-escalation rip' than any meaningful downside risk. Yes there has been selling, and the latest NAAIM exposure is down to 60, the lowest since last May. The percentage of SPX components above their 200 DMA is down to 48%. The issue is that both of these are far from washout levels, and thus we continue to see more downside risk than upside reward. The other concern is there is nowhere to hide as the bond market has rapidly repriced, with odds for a '26 rate cut in the U.S. now flipping to small odds of a hike. Further, global yields have begun to break out after several years of consolidation, particularly in Europe. This has shades of '22 when risk parity failed. While we are always mindful of when something becomes so bad it's good, we think it's far too soon to be a contrarian bull and continue to see downside risk for the SPX towards 6k.

SPX Testing 4Q Low. SPX has now firmly lost its 200 DMA (6621) and its 4Q low of 6521. This completes a medium-term top. We lower our upside risk to 6,800 (from 6,900), and absent a close above that level, we continue to see risk towards ~6k.

Breadth Weak, but No Washout. Less than 50% of SPX now above their 200 DMA. This is a weak reading, but far from levels we would consider a washout like we saw a year ago (sub 20%)

OEX, Mag7 Breakdowns. The S&P 100 (OEX), and Mag7 (MAGS) have both lost their 4Q low as well as their 200 DMA. NVDA (Not Rated) below its 200 DMA first time since last May.

Semis - The Last Holdout. Semis are really the last major industry group that hasn’t felt any pain. We think they are topping here though and see meaningful downside risk for the group, especially if SMH breaks ~375.

Discretionary Losing November Low. The XLY has firmly lost its November low, and equal-weight discretionary (RSPD) is close.

Biotech a Bright Spot. Biotech (XBI) has held up remarkably well over the last few weeks. New leadership often exerts itself during market corrections, so biotech should certainly be at the top of that list.

Exposure Finally Starting to Unwind. NAAIM exposure down to 60, lowest level since last May. This is starting to get interesting from a contrarian standpoint, but still room to move lower especially on a 5wk average.

Nowhere to Hide. The market has quickly not only priced out rate cuts for ’26, but now starting to price in hikes. That drastic repricing, even if it doesn’t actually happen, is another headwind to risk assets right now. Risk parity breakdown as bonds and stocks sell off together, with shades of '22.

Bond Volatility Ready to Pop. For VIX of TLT hard to not see a big base ready to pop higher. European rates (UK, France, Germany) as well as Australian 10yr all breaking out of multi-year ranges.