Relief rally is ‘questionable at best,’ says Piper Sandler

Piper Sandler is casting some doubt on the sustainability of the recent market uptrend. “This relief rally in equities is questionable at best,” wrote chief market technician Craig Johnson. “We believe the market has entered a High-Level Trading Range (HLTR) during the last few weeks. Our outlook calls for the SPX to fluctuate between 4,600 and 4,800 on the low end and around 5,100 on the upper end in the coming months.” Stocks surged last week after a soft April jobs reports boosted hopes that Federal Reserve rate cuts are still on track for 2024 and earnings continued to roll in. The moves followed a down April for equities and the worst month for the Dow since September 2022. .SPX YTD mountain S & P 500 this year Year to date, the S & P 500 is up more than 8%, with the low end of the firm’s range suggesting the benchmark could fall 10% from Friday’s close. Despite this seemingly positive backdrop, current conditions suggest it may be too soon to tell whether there is more to the rally, compelling the firm to favor a “more tactical approach.” “We prefer a wait-and-see approach, especially since all the major indices … gapped up to challenge resistance at their respective 50-day MAs,” he said, referring to the 50-day moving averages of the major U.S. stock benchmarks. When an asset breaks above its 50-day moving average, it is seen as a sign of strong momentum. The S & P 500 on Monday rose, breaking above its 50-day moving average. The broad market index has not closed above that level since April 12. The Nasdaq is also trading above its 50-day average.