Why the S&P 500 is now overbought and looks set to fall in the short term, according to this strategist

The S&P 500 achieved another record close on Wednesday, as the Federal Reserve assured investors that it is in no rush to tighten fiscal policy, and that some of that momentum will continue through Thursday, but may not last long. The call of the day is that a number of technical factors suggest that the index is currently overbought and is likely to decline in the short term, according to Michael Kramer of Mott Capital Management.

Last week, Kramer outlined how the March 2020 uptrend in the S&P 500 SPX was being challenged, + 0.15%, and that the index had to break higher to avoid falling through the trend line. And it did: the index hit a record on Monday to start the trading week on a positive note that has held for the past few days. However, momentum has stalled with the index around 4,080 points. According to Kramer, based on the concentration of stock market options contracts, the index is more likely to move to 4,000 points than to 4,100 points. This is because it appears that most of the “range” is centered around 4,000, Kramer said. Gamma is a key measure of risk in options trading. Kramer said this concentration will prevent the index from rising much higher, especially since the options contracts expire next week. Also, based on the Bollinger band, which is a statistical measure that characterizes price and volatility over time, the S&P 500 is already overbought, Kramer said. This “will likely result in a drop to fill some of the opening gaps, with the possibility of it falling to 3,960,” he said. Meanwhile, Kramer pointed out that the total volume of call options – the right to buy a share at a certain price – continues to fall in the market. This has been a significant factor in helping the Cboe Volatility Index, or VIX VIX, -0.70%, sink well into pre-pandemic territory. The Apple AAPL rumor, + 1.34% will argue that it faces “abundant” competition in the video game transaction market in its lawsuit against Epic Games, according to a Reuters report. The tech giant faces antitrust charges from the “Fortnite” developer, which focus on Apple’s control over in-app and in-app purchases, including its commission of up to 30%. Federal Reserve Chairman Jerome Powell and International Monetary Fund Managing Director Kristalina Georgieva will discuss the world economy at noon ET. Elsewhere on the economic front, data on initial jobless claims for the week of April 3 is due at 8:30 am along with ongoing jobless claims. 619,000 Americans are expected to file for unemployment last week, down from 719,000 the previous week. More than 3,200 workers at the Amazon warehouse in Bessemer, Alabama, voted last week to unionize, representing 55% of the location’s total workers. The public portion of the vote count is expected to be released on Thursday or Friday. Billionaire Peter Thiel, co-founder of payment system PayPal PYPL, + 0.95% and Palantir Technologies PLTR, -1.59%, warned that China could be using bitcoin to undermine the US Thiel said China wants to see two global reserve currencies – Not just the dollar, and it’s trying to raise bitcoin BTCUSD, + 1.01% to fill that second role. In case you missed it: Minutes from the Fed’s March meeting showed central bank officials appear divided into two camps on the inflation outlook. The bankers also made it clear that they would not cut the bond purchase rate anytime soon. The Markets US equities will open higher, near record highs YM00, -0.01% ES00, + 0.33% NQ00, + 0.88%. The same is true in Europe, where stocks were much higher SXXP, + 0.33% UKX, + 0.35% DAX, -0.19% PX1, + 0.39%, after investors had a first chance to react to the minutes of the Fed confirming continued loss of stance on fiscal policy. Asian stocks were mixed, but mostly ended the day with a higher NIK, -0.07% HSI, + 1.16% SHCOMP, + 0.08%. The graphic

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Interest rates, oil prices and the dollar index are all rising, which means earnings growth is likely to peak and add up next year, according to Jesse Felder of the Felder Report blog. An integral part of the rally in stocks over the past year has been the rally in earnings, which is expected to continue into the coming quarters. But our chart of the day, from Felder, shows that the bearish reversal of fundamentals, which the market discounts more than a year into the future, could affect stocks soon. Random Reads A Washington State couple won the lottery twice with tickets from the same store. Up, Up, and Away: A 1938 comic featuring Superman’s first appearance sold for a record $ 3.25 million at auction. Need to Know starts early and updates until the opening bell, but sign up here to receive it once in your email box. The emailed version will ship at approximately 7:30 am ET. Do you want more for the next day? Sign up for The Barron’s Daily, a morning investor briefing, featuring exclusive commentary from the Barron’s and MarketWatch writers.