S&P 500 is ‘overbought’; BTIG sees ‘very poor risk/reward’ into CPI report

By Senad Karaahmetovic

BTIG technical analysts warned the broker’s clients about the “very poor risk/reward” in the as investors await March that is due later today.

“We continue to see very poor risk/reward broadly here. Daily stochastics for SPX are as overbought as they have been in the last year,” the analysts wrote to clients yesterday after market close.

They also weighed in on the discussion that speculators in S&P e-mini futures are the most net-short since 2011.

“While it’s true that it can be contrarian, in bear markets it’s often just the opposite. In fact, prior to the recent move, the biggest net-short was in mid-August ’22, just prior to Jackson Hole and a nearly -20% draw down into the October lows. Further, there was a nearly equally large short-position in July ’08, prior to the bulk of the GFC bear market decline,” the analysts added.

Sector-wise, the analysts also highlighted banks, especially regional ones, as trading in a very bearish manner.

“There is the possibility we get a short-term “buy the news” relief rally as their EPS comes in, but when something gets extremely oversold and can’t bounce, there’s usually another leg lower on the horizon.”

These comments come on the same day that saw Wells Fargo analysts warn the bank’s clients that the S&P 500 is set to correct about 10% in the next few months.

are up 0.2% in premarket Wednesday.