A Bigger Rally May Be On The Horizon for the S&P 500, According to Fairlead Strategies

Investing.com -- Analysts at Fairlead Strategies noted in a report published on Tuesday that the SPX and Russell 2000 indices surpassing their post-election peaks on Wednesday indicates further potential for an upward trend before any market pullback occurs.

"Given this situation, we recommend maintaining most long positions and temporarily reducing existing hedges, including inverse ETFs and other negatively correlated positions," the analysts stated.

The yield on the 10-year Treasury bond significantly fell by 13 basis points on Wednesday, dropping below its 20-day moving average (MA) due to a decrease in upward momentum.

Analysts added that the absence of short-term oversold conditions could provide additional room for yields to drop towards an initial support level identified around a Fibonacci retracement level of approximately 4.15%.

Following this short-term pullback, higher lows for the 10-year yields are expected compared to the support level seen in September, which was around ~3.60%.

In the realm of China-focused exchange-traded funds (ETFs), both FXI and MCHI have shown short-term trend-reversal 'buy' signals based on the TD Sequential model, indicating a potential two-week rally. However, caution is warranted as a significant corrective low has yet to be confirmed.