Carter Worth: Technical Indicators Suggest Market Caution

Market Indices at Critical Juncture

• 📈 The S&P 500 is currently about 4% above its pre-tariff high, with other major indices like the Dow and MAG 7 also back at their former highs but not yet exceeding them.
• ⚠️ The S&P 400 midcap index is lagging, sitting about 5% below its previous high, despite being a strong long-term performer.
• 📊 The S&P 500 equal weight index mirrors the Dow and MAG 7, having recouped losses and sitting at former highs.

S&P Midcap and Equal Weight Performance

• 🚀 Historically, the S&P midcap index (since its inception in June 1991) has significantly outperformed the S&P 500.
• 🌟 Similarly, the S&P 500 equal weight index, often cited as a measure of market breadth issues, has also outperformed the S&P 500.
• 🧐 The recent strength in the S&P 500 might be an attempt to catch up with these other indices.

Potential for Market Downturn

• 📉 This week is critical as key indices face a decision: break out to new highs or form a double top, signaling a potential downturn.
• ⚠️ Carter Worth advises reducing exposure in anticipation of a normal dip, drawdown, sell-off, or decline.

Confirming a Breakout

• 🎯 A true breakout above a former high needs to be sustained, not just a brief new high followed by a significant fall.
• 🤸 A clear confirmation requires clearing the former high by a certain amount, typically 3.5% to 4%, and staying above it, akin to a gymnast nailing a landing.