The mood seems cautious as Global stocks are headed for their biggest 2 day decline in a month and bond yields near record lows . However US Futures right now pointing to only a 0.60-.70% decline and as mentioned yesterday, SPX has not even had 1 trading day which has closed under a prior day's lows since May 13, so an incredible amount of resilience that doesn't quite look complete. The surge in bonds globally has resulted in a lot of uncertainty ahead of the BOJ, BREXIT vote, and this month's Fed meeting next week.. And Japan's 10yr got down to -0.155 while German bunds hit .02 bps- Our own US Treasury yields have hit 1.65, and stretched after a quick move from near 1.90 just in the last 2 weeks, but the breakdown in both 10 and 30yr yields looks meaningful and will likely have to be reversed before stocks can breakout to new highs-
The crack in 2105-6 in June futures, 2097 for the new SEPT, represented a break of a minor Head and Shoulders pattern which had formed since Tuesday- The 1-2 day pattern is negative as a result of this break, until regained, and while weakness should prove muted, we could see a move down to near 2080-3 max before gains occur back to new highs- For now, given the selling in Europe and the ongoing pullback in Treasury yields, this likely needs to stabilize a bit before US stocks can be counted on to bounce too meaningfully.
Europe remains a great deal weaker than US, and looks to likely break down structurally, which could take SX5E near 2800 or slightly lower before rallying. For now, the structure has turned a bit more negative, but breaking this 2875 area will be key
Key to note for the last 24-48 hours- 1) Bounce in the USD looks to be carrying through sufficiently to allow for GAINS this week after last week's carnage and commodities have begun to weaken a bit in the last couple days, as might be expected. WTI lower by 1.4% down under $50 2) Utilities have broken out in relative terms and should still be favored for outperformance given yields plummeting, as the search for yield continues- 3) Financials broke down to new weekly lows in relative terms, and still should be avoided as yields are dropping. The XLF etf overall doesn't look as bearish, but various stocks like BEN, GS, KEY, PRU, are all breaking down in a manner which could allow for further 2-3 day weakness. 4) Both USDJPY and SX5E look to move lower on a 2-3 day basis, which means that US Equities also could show minor weakness into early next week- However as mentioned, given the amount of resilience and LACK of real overbought conditions, continued skepticism, bullish technical structure and lack of Demark sells.. Pullbacks should prove short lived, and likely buyable into next week- Technical shorts to consider: BBBY, GES, URBN, HOG, TIF, CONN, DV, KMX, along with the financials mentioned above- For this morning- seeing strength out of SPHS, GBT, CLF, HRB, AMAT, NX, ONVO, while on the downside- GEVO, AJX, GIG, AR, and GLW- Key for S&P JUNE and SEPT futures are 2092-4 then 2082-4