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We think the odds of a signal failure are pretty high here, says JPM's Jason Hunter

Mar 15, 2024
It all brings us to our talk about the tape being a Moment of Truth for rapidly approaching markets. The closely watched JP Morgan technician

says

it could be a level for stocks and argues that it is so important that if it breaks it could lead to accelerated declines. Jason Hunter joins us. now on the phone, he is the head of technical strategy at JPM. Welcome, it's good to have you on our program. I mentioned it from above. Here is the 200 day moving average that everyone seems to be obsessed with. You're watching a different level though in the S P, can you tell our viewers what it is and why?
we think the odds of a signal failure are pretty high here says jpm s jason hunter
Thanks for inviting me. Yes, it really is a group of levels in the 3900s, including the 200-day, but in the same area you also have the 50-day, 100-day moving average, and more. It is important to note that if we look at approximately 3,900 in that area and go back to May of last year, since the s p is trading in this very wide range, it is trading around it, either as support or resistance, so which obviously today you can see the market trying to rebound. that key area, but we believe that the pressure, you know, increases to the downside and even if we bounce in the short term, we expect an eventual breakout to the downside and an acceleration towards lower price levels.
we think the odds of a signal failure are pretty high here says jpm s jason hunter

More Interesting Facts About,

we think the odds of a signal failure are pretty high here says jpm s jason hunter...

How would you describe w

here

you

think

the momentum is? In the market right now, what started the year with new momentum obviously slowed down a bit recently as rates continued to rise, so how would you evaluate that? Yeah, so I would say if you look at the bottom. frequency momentum

signal

s that you know as a technician if you just look at charts in isolation, things like the golden cross, the 50 day average moving above the 200 day average, statistically they actually have decent forecast value for a period of three to 12 months and that is on the upside, w

here

it works better than the random trade entry, which was saying that we also incorporate a macro overlay into our work, uh, because these

signal

s don't just operate in a vacuum, you know, and one of the things that we

high

lighted if you go back and look at In the early 1990s, the Golden Cross spiked right in front of that early 1990s recession and when we

think

about things like the yield curve has invested for a year, you know, backward-looking operating leverage declines for a year, the market is now projecting a Fed. policy rates at over 2x, you know, theoretical neutral, um, you know the

odds

that you're going to get a failed signal um, we think they're

pretty

high

here, so no, we don't follow that and, uh, that momentum signal, in fact, we were saying sell 4100 4200 and look for an eventual break down.
we think the odds of a signal failure are pretty high here says jpm s jason hunter
You also argue that sp seems overvalued for something. You point out the money market curve. I mean, I want you to explain to me that you are simply talking about there being other alternatives out there. of stocks that you can get a better return on than the stock market, one of which is in pure cash, at the interest rates you're getting paid now, but while that theme aligns with what we're saying , what we are really looking for. Which in that model is the shape of the money market curve, that is, how high the Fed is expected to raise rates in the short term and then how many easings are priced in as a result of that and for that We are looking at the forward market to see what the market expects the path of monetary policy rates to be, we have used it for most of the last year, which has done a very good job of explaining the s p.
we think the odds of a signal failure are pretty high here says jpm s jason hunter
It's mainly been a multiple reduction in line with fueled expectations that they will become more and more aggressive if you look at the s p over the last month, because we have had interesting data on both the demand side and the inflation side, we have seen how the money market curve revalues ​​quite aggressively. a bit and the s p is actually not selling as much as one would have thought given that even with the sell off we have had we have gone from two standard deviations overbought to about one and a half standard deviations overbought. You know, the fair value, more or less, is about 3,800 in that model, by the way, how the Fed is pricing right now.

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