🚀 June’s AI-picked stocks soar, with Adobe +18.1% in 11 days. Don’t miss July’s upcoming picks.Unlock full list

BofA: Negative divergences are a tactical risk for US equities

Published 06/11/2024, 07:53 AM
© Reuters
US500
-

Bank of America analysts warned of "tactical divergences" that could dampen the positive summer seasonality typically expected for the S&P 500.

"The SPX achieved a new all-time high last week, but the advance-decline (A-D) line, 5-day put/call ratio, the US high yield OAS, the Corporate BAA spread, and new 52-week highs did not confirm this new high on the SPX," states the BofA note.

These divergences are seen as a potential risk for US equities in June, with support levels for the SPX identified at 5191 and 5000-4953.

BofA highlights a concerning decline in new 52-week highs on the SPX. "The percentage of SPX stocks reaching new 52-week highs shows a late-March into June bearish divergence," the report says.

While the number of new lows remains contained, BofA identifies a potential escalation point: "If the percentage of stocks at new 52-week lows moves above the 2.19-3.18% range that has held on tactical dips since early November 2023, the risk for a deeper correction would increase."

In addition, BofA says that while major indexes like the SPX and NASDAQ 100 reached new highs, others like the NYSE and Russell 2000 have lagged behind.

The BofA note also highlights the continued risk aversion among retail investors, evidenced by record highs in cash holdings through money market funds. "Retail money market funds (MMF) total net assets reached a record high of $2.45 trillion last week," BofA states. This suggests investors remain cautious.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.