A plethora of economic data from China has unveiled a tepid recovery, leaving investors unimpressed. This disappointment follows prior unease caused by central bankers adopting a hawkish tone, challenging the prevailing narrative of early rate cuts. Concerns surrounding attacks in the Red Sea have revived worries about potential disruptions to the supply chain and increased geopolitical tensions, contributing to an overall risk-averse sentiment.
On a technical note, while the S&P has achieved a new high, the daily Relative Strength Index (RSI) has not followed suit. This discrepancy indicates a waning upside momentum, occurring just before the 2022 all-time high at 4809. Our recommendation is to tighten stops on long positions and closely monitor the recent low at 4682. A failure at this level, coupled with a drop below the July 2023 high at 4607, would further contribute to the prevailing negative sentiment.