DATA & FIGURES
The S&P 500's 14-day RSI ran above 70 at the late-May high and fell to the low 40s at this month’s lows before settling back near 53. The Money Flow Breadth Ratio (MFBR) ticked up to 60% as of June 12 and sits back in buy territory after sliding to 55% the prior week. The 10-year Treasury now yields about 4.45%, while the S&P 500’s trailing earnings yield sits near 3.7%.
THE SCENARIO
The geopolitical, economic, or regulatory context is crucial in understanding the current market situation. The bull market pullback was expected, and the decline found its floor exactly where trend-followers add rather than abandon.
DIRECT QUOTE
"“The riskiest thing in markets is the belief that there is no risk.”" — Howard Marks, Investor
BBN INSIGHT
The current market situation requires a balanced approach, staying invested while managing risk simultaneously. The Money Flow Breadth Ratio keeps us invested because the weight of the evidence and a clean test of support still point higher.
MARKET REACTION
The market reaction to the pullback was positive, with the S&P 500 bouncing back to close at 7,431.46 on Friday. The bounce was driven by broad participation, with Thursday’s 1.75% surge coming on broad participation rather than three megacaps doing all the lifting.