Investing.com — The S&P 500 faces downside risks in January, according to Jonathan Krinsky, a chief market technician at BTIG.
In a Thursday note, Krinsky highlighted the interplay of three critical forces – the dollar, yields, and market breadth – which continue to exert pressure on stocks.
“A three-body problem is when three objects with similar mass are in close proximity and therefore exerting force on each other. In the current market, we can view the three bodies as: the dollar, yields, and breadth,” he said.
“When the dollar and yields are exerting upward pressure, and breadth downward, we have issues,” Krinsky explained.
The start of the year brought little relief for bulls. The SPDR® S&P 500 (NYSE:SPY) kicked off the year with a 0.56% gain at the open, but by around 1:40 pm ET, those gains had reversed, leaving it down 1.27%.
According to Krinsky, this ranks as the third weakest first trading day performance since 1993 for sessions that began with at least a 0.5% gap up. Only the starts in 2000 and 2001 were worse, with intraday losses of 1.9% and 2.4%, respectively.
The strategist added that while the Santa Claus Rally period concludes on Friday, the S&P 500 must close above 5974 to avoid signaling a failing rally. “As the saying goes, ‘if Santa Claus should fail to call, bears may come to broad and wall’.”
“While we aren’t ready to call for a bear market, we continue to see downside risks for January,” Krinsky added.
Apple (NASDAQ:AAPL)’s stock performance also drew attention. Heading into January, the tech giant’s shares recorded five straight weeks of gains exceeding 2%.
But since reaching an all-time intraday high last Thursday, the stock has fallen 6.7%. Still, despite the pullback, Apple stock remains comfortably above its 50-day moving average and the breakout zone near $235-$237, prompting BTIG to maintain a cautious stance.