As the fight between market bulls and bears over the direction of the S & P 500 index intensifies, the bears could prevail, according to global financial services firm BTIG. "So far neither side had been proven right, or wrong, and we remain in a standoff of weak breadth vs. strong SPX," said BTIG's Chief Market Technician Jonathan Krinsky, adding that the index was "dead-flat" over the last five weeks while the median stock is down 4.5%..SPX YTD mountain S & P The bulls are convinced that the SPX is poised for a "massive upside reversion," something that has remained elusive as rates continue to rise, BTIG said.
Meanwhile, the bears argue that the SPX "can't hold up much longer" as the market breadth, or the number of stocks powering the index, keeps shrinking, bond yields continue to rise, and credit spreads — the difference between yields on relatively safe and risky debt — widens.
BTIG said it remains in the bear camp. "While the ongoing divergences have persisted longer than many, including us, would have thought, we continue to think this doesn't end until we see the holdouts succumb by breaking lower," according to BTIG said.
It said that mid-caps were firmly below their 200-day moving average, and have declined over 8% from recent highs, adding that Treasury volumes were "blowing out" which historically aligns with a pullback in the S & P 500. "So far we haven't seen that.
Yet another way to say 'something's gotta give.'" That said, utilities could be "worth looking at for a tactical bounce," according to BTIG as the risk-reward for the sector looks favorable. "Yields are higher today, yet Utilities are leading, a good sign."