The S & P 500 finally surpassed its prior all-time high from January 2022 on Friday, confirming the start of a new bull market that began in October 2022. The milestone has been powered by traders’ optimism that the Federal Reserve will lower interest rates this year, the economy will skirt a recession and earnings will grow. But while the market continued to build on those gains early Monday, some technical analysts are worried that cracks are beginning to show in the broad market index. .SPX 1Y mountain S & P 500 in the last 12 months BTIG chief market technician Jonathan Krinsky forecasts a pullback for the S & P 500 before it reaches the key 5,000 level, or just around 3.5% above current prices. He cited an “increasing number of divergences” contributing to his “push-through failure” hypothesis, such as falling odds of a Fed rate cut in March. To his point, traders are now pricing in a roughly 42% chance of a Fed rate cut in March, according to CME Group’s FedWatch Tool , sharply down from almost 81% odds a week earlier. “Correlations don’t last forever, but we have to imagine a decent part of the rally off the October lows was due to anticipation of rate cuts starting in March. If so, then this divergence is likely to resolve with SPX moving lower over the near-term,” Krinsky wrote in a Sunday note. Krinsky also remains concerned by a “significant” divergence between downside volume and breadth. Downside volume usually rises as the market falls, but it has actually risen over the past few weeks during the rally, the technician pointed out. Several individual names have already started to trend lower . Around 73% of the S & P 500 is currently trading above its 50-day moving average, down from more than 90% in late December, according to David Keller, chief market strategist at StockCharts.com. “This is a significant divergence and means either breadth quickly improves, or the major indices have significant downside risk as they ‘catch down’ to breadth. We saw a similar set-up in late ’21,” said Krinsky. There are also worries that the market can soon become tired. “New index highs lead to fatigue,” said Roth Capital Partners chief market technician JC O’Hara. “The majority of gains following new [index] highs came at least six months later. There was initial fatigue,” O’Hara said. “This makes sense to us because the majority of bearish to bullish reversals use a lot of muscle and momentum to claw back everything that was lost (a -20% decline requires a 25% claw back). It is a lot harder for stocks to climb than it is to fall.” There’s also the rest of the world to consider, says Wolfe Research’s Rob Ginsberg. Japan, Brazil and India are also at a similar point to the U.S., approaching or at their all-time highs. Japan’s all-time high dates from late 1989. But elsewhere, China is trading at its “lowest-ever level” relative to the U.S., while Europe and the U.K. are also pulling back. “With overbought conditions yet to come in across global markets, and the U.S. shooting to new highs even with poor breadth and accelerating yields, we certainly feel as though pullbacks are coming,” Ginsberg said in a client note Saturday. — CNBC’s Michael Bloom contributed to this report.
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