The major themes impacting the markets over the next few months will be Chinese data and yuan devaluation, forward corporate earnings guidance and the June and July Fed meetings. Of the three, the Fed will have the most impact as the market tries to square a “data dependent” Fed with a “market level dependent” Fed.
Technically, there is room for pro-cyclical equities – e.g. energy, financials, industrials, consumer discretionary – to run in the short term, certainly into the June meeting and then maybe to the July meeting. But also technically, the ratio of the S&P to the 10-year U.S. treasury is stuck in a band where stocks versus bonds are expensive. This level capped the run in the spring and late summer last year, and as well back in 2007.