There's bias for market to correct over the short-term, says JPMorgan's Jason Hunter

Market Analysis & Outlook - JP Morgan notes the impressive market rally since early April is showing signs of slowing down, with smaller steps and narrower ranges [1][2] - Technical analysis suggests rally exhaustion, with momentum divergence indicating a short-term correction bias [3][4] - A potential 5% pullback to the 5700-5800 level is anticipated, but summer seasonals are expected to provide support [5] - Positioning suggests speculative community is not overly long, and retail investors are unlikely to sell ahead of a correction, contributing to market resilience [8][9] Treasury Market Insights - The front end of the Treasury market has priced in 3-4 rate cuts, remaining rangebound, while the long end shows weakness due to concerns about US exceptionalism and fiscal discipline [9] - Bonds have formed a multi-week yield top pattern, retesting the cycle high around 415-418 (likely a typo, should be 515-518), with a potential break below 480 leading to lower yields towards 460-455 on the 30-year bond [10] - This bond setup is considered an out-of-consensus view, contrasting with prevailing sentiment [11] Sector & Asset Class Preferences - Deep cyclicals, including materials and energy, were previously favored ahead of recent headlines [12] - Base metals appear exhausted and some are rolling over, while energy has broken through resistance, reaching 80, but its future depends on the current crisis [13][14] - Small caps are considered more vulnerable, remaining below their breakdown zone, with a preference for quality stocks, the Magnificent 7, and big AI tech names in a market sell-off [14][15]