Seven warning signs — and two positives — for the market: BTIG’s Krinsky

[bad day at wall street]
franckreporter

The stock market is flashing too many warning signs to ignore, according to BTIG technical strategist Jonathan Krinsky, though he sees a couple of areas that could encourage the bulls.

Krinsky noted that the SPDR S&P 500 (SPY [https://seekingalpha.com/symbol/SPY]) had a daily RSI of 78 on Thursday before falling 1.2% on Friday. Since 2003, there have been only six prior instances when SPY lost more than 1% immediately after an RSI reading above 75, and average returns were negative across every timeframe from five to 40 days. Five of those six episodes saw at least a 7% peak-to-trough decline in the following weeks, while the lone exception in 2023 traded sideways.

The weakness also hit one of the market’s biggest leadership groups. Semiconductors and AI stocks finally cracked Friday, with the VanEck Semiconductor ETF (SMH [https://seekingalpha.com/symbol/SMH]) falling 3.8%, its worst day since March. Krinsky said the move supports his view that semis (SOXX [https://seekingalpha.com/symbol/SOXX]) and AI (ARTY [https://seekingalpha.com/symbol/ARTY]) (AIQ [https://seekingalpha.com/symbol/AIQ]) are more likely to “catch down” to the rest of the market than pull laggards higher.

Breadth remains another concern. BTIG said 70% of NYSE volume was in declining stocks Friday, the highest level since March.

The S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) (IVV [https://seekingalpha.com/symbol/IVV]) (VOO [https://seekingalpha.com/symbol/VOO]) also recently stood 8.5% above its 50-day moving average while only 47% of index members were above their own 50-day averages, which Krinsky called the widest divergence on record.

Other pressure points include the 30-year Treasury yield (US30Y [https://seekingalpha.com/symbol/US30Y]) moving back above 5%, December crude oil (USO [https://seekingalpha.com/symbol/USO]) nearing cycle highs above $84 and the S&P 500 Tech sector (XLK [https://seekingalpha.com/symbol/XLK]) reaching a record 37.5% index weight, above the dot-com bubble peak.

There are still some positives. Krinsky said one of the largest negative 31-day moves in value versus growth could set up relative upside for value. Software is also still working higher, with the iShares Expanded Tech-Software Sector ETF (IGV [https://seekingalpha.com/symbol/IGV]) near a multi-month relative high versus the S&P 500 and expected by BTIG to fill its gap around $98.

MORE ON SPDR S&P 500 ETF TRUST, VANECK SEMICONDUCTOR ETF, ETC.

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