The stock market will signal a hard landing is coming for the economy if it falls below this key level, Bank of America says

Financiers can anticipate a tough landing in the economy if the S&P 500 drops listed below a crucial technical level, according to a Thursday note from Bank of America strategist Michael Hartnett.

Hartnett highlighted the S&P 500’s 200-day moving average as a crucial line in the sand that would signify whether the economy is heading for a larger decline.

” Technical levels that would turn Wall St story from soft to tough landing have actually not been broken … 4% on 30-year Treasury, 400bps on HY CDX, 5050 on S&P 500,” Hartnett stated.

The 5050 level on the S&P 500 refers the index’s increasing 200-day moving average. Since Friday, the S&P 500 traded at 5,317, or about 6% above its 200-day moving average.

” Crucial now for stock leaders SOX (4600) and huge tech XLK (200) to hold 200dma levels … if levels break, traders then target 2021 highs (i.e. 10% lower),” Hartnett stated.

The SOX Semiconductor Index and the XLK ETF both checked their 200-day moving average as technical assistance levels previously today throughout a rise in market volatility before bouncing greater once again.

While the crucial technical assistance levels in the stock exchange have yet to be breached, Hartnett bewares in his outlook for the United States economy and stock exchange.

For a soft landing to take place, a lot needs to go right, consisting of the Federal Reserve cutting rates of interest and lower rates of interest resulting in an increase in financier belief.

However rate action in particular locations of the stock exchange is not motivating, according to Hartnett.

” Cost action in biotech (longest period equity) no bueno and no lift yet to United States retail stocks (customer discretionary at 12-year relative lows,” Hartnett stated.

Hartnett is staying with his playbook of offering stocks after the Fed executes its very first rate cut, which is anticipated to occur at its policy conference next month.

” We stay in ‘offer the first cut’ camp,” Hartnett stated, including that he sees growing dangers in AI-related stocks as they race to reveal a roi from their enormous GPU costs.