S&P 500 Risks Deeper Pullback in Next 2-6 Weeks: Fairlead By Investing.com

Fairlead Strategies released a report today that sees potential weakness in the US stock market, with the risk of a deeper pullback in the coming weeks.

The research firm, which focuses on technical analysis, points to a notable weakening of short-term momentum as evidenced by the daily moving average convergence divergence (MACD). This is a technical indicator used to measure market movement.

“The SPX has seen short-term momentum weaken especially on the daily MACD, putting it at risk of a deeper pullback over the next 2-6 weeks,” strategists wrote in a note.

“Initial support is at ~5430 on the cloud pattern, which we believe is at risk for a retest of the next support near 5200. Loss of near-term momentum is widespread, affecting small- and mid-cap benchmarks as well” .

Fairlead also noted that Japan experienced a significant decline of more than 5% this week, leading to a negative adjustment in near-term indicators. This brought into focus the possibility of the Nikkei retesting the key support level, currently around 34,000.

A deterioration in the long-term gauge indicates that Japanese stocks are likely to enter a period of range trading. That period could last several more months, even if they maintain their secular uptrend, Fairlead added.

In the commodities market, it showed signs of a potential rebound. A new short-term oversold “buy” signal suggests there could be a stabilization above the December low, which is around $69 a barrel.

Analysts are monitoring whether WTI can recover support close to 75 dollars per barrel. Failure to do so could lead to a significant decline, resolving the long-term triangular pattern in crude oil prices, the research firm also noted in its report today.