2+ hours left to go, indices have attempted to stabilize since Europe's closing, but too meaningful of a bounce thus far. S&P got right down to key support outlined in our Daily piece this morning Newtons Notes 050316-- 2047, and we've bounced about 10 handles, yet not sufficient to call a low of any magnitude. Closing below yesterday's lows of 2056 for S&P Futures, 2066- SPX cash would allow for US Equities to move back lower and take out last week's lows- 2046- SP FUTURES< 2052-SPX cash, which should drive prices down towards early April lows before any bottom of magnitude appears. For now, this remains a short-term pullback as part of a healthy intermediate-term rally, and this selloff should prove short-lived, and turn out to be buyable near 2026-30- SP FUTURES , and 2033-5 SPX cash.
Breadth right now is far heavier on the downside than anything we'd seen in the prior weeks, or nearly 5/1 down, while volume is nearly 7 to 1 down, producing a TRIN reading, or ARMS index reading of 1.8, so a high amount of volume into Declining issues.. but for now, this is an intra-day reading only.
The Dollar index's decline seems to be firming in the short run, though many in the Media are quick to jump on this pullback in being complete, saying to short the Energy and Metals complex, which seems a bit easy and premature given the trends they've had of late. I do suspect the Dollar index is CLOSE to bottoming, given signs of near-term bearishness on USD, along with High SPEC longs in the Metals, Energy complex while both of these remain quite overbought in the short run. All legitimate points, which when combined with the seasonality for Metals typically peaking in May, along with CRUDE, suggests this should be close. However, most timing models still show a good chance of the US Dollar index's lows being tested in the next week, so my thinking is, a bottoming PROCESS has begun for the dollar, and peaking PROCESS for the metals and OIL.. where further gains to new highs should be used to pair down longs and look for shorts and that a 2 month rally in USD is right around the corner. However,, with many quick to jump the gun on this Dollar rally, my thinking is it remains a bit premature, and that thought process is primarily based on the lack of BUY signals in DXY using counter-trend methodology.
Treasuries are enjoying a decent day, as yields are finally turning down after nearly a week of being largely sideways (similar to the SPX in that nature) and the Yield decline in both bunds and TY yields looks important, and likely to persist for another 2-3 days in the short run.
Sector-wise, Energy and materials are the worst performing of the major sectors, while Healthcare and Staples are POSITIVE for the day. Utilities, despite the Yield pullback, remain down by 0.50%. But the Financials drawdown of 1% PLUS, seems more meaningful, and could continue if yields pullback to near 1.75 on the 10-year, as 1.80 was an important level.
Overall, this selloff should prove temporary in nature and give way to rally attempts back to the highs and despite this minor selling, US equities remain in much better shape than European or Asian equities which are experiencing far more downside volatility.
Not much progress thus far on the upside on this bounce. The near-term structure remains bearish
Still very little underlying weakness seen on weekly charts, which is important to point out. and Momentum remains very much positive, so much of this is just churning and not indicative of a major peak. This stallout should prove short-lived. Downside volume now swamping advancing volume creating very high TRIN readings, yet prices remain largely range-bound/choppy near the highs
Broadbased indices like the NYA have begun to breakdown and followthrough after violating trends from mid-February, so this IS a minor negative with regards to structure. However, the weakness thus far has proven minimal, and its thought that pullbacks likely hold above 10k in the NY COMPOSITE and should be buyable
Minor signs of today trying to bottom out after early decline UNDER last August lows- however, it will take more to be convincing of a low at hand, and my thinking is, another day or two of bounce likely leads back to new lows into early next week before a true low is at hand. But nonetheless, an important part of the process for trying to bottom out
EURUSD got extended today above 1.16 before a minor pullback from early highs, but should still find its way up to near 1.17 and test last Summer's peaks before topping, which is based on both structure and based on LACK of meaningful counter-trend signals to suggest this rally is complete. 1-2 day pullbacks in EURUSD should be bought for another move to highs BEFORE any larger peak, from a short-term trading perspective