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Investing.com -- BTIG’s Jonathan Krinsky warned that the S&P 500 may be nearing a tactical top, citing stretched technicals and an overly optimistic run-up ahead of a high-stakes U.S.-China meeting.
“We know there is a meeting (the known), we just don’t know what will come of it (the unknown),” Krinsky wrote in a note.
He cautioned that when markets rally into such “known unknowns,” they often struggle to sustain momentum once the event passes, regardless of the outcome.
“This creates a very poor near-term risk/reward, in our view,” he added.
S&P 500 futures have been higher in 12 of the last 14 sessions, with the index recently coming within 27 points of its 200-day moving average at 5,746.
While Krinsky sees potential for the index to reach the late March high of 5,786, he believes it is unlikely to move meaningfully beyond that in the near term.
“More important resistance…is slightly above that at the late March high,” he said, noting 5,925 as the next key level above.
Krinsky also flagged overbought technical indicators, saying the daily stochastics on the S&P 500 are “the most overbought since late February,” which suggests “upside is limited here.”
He pointed to other signs of froth, including a failed attempt by the Nasdaq 100 (QQQ) to hold above its 200-day moving average and a sharp rebound in momentum stocks.
“GS High Beta Momentum…has rallied 38% off its lows,” he noted, adding that such rallies into resistance often precede weakness.
Additionally, Krinsky highlighted that investor exposure is elevated, with the NAAIM Exposure Index back to 81—the highest since February—suggesting professional managers are “fully back in the pool.”