September 12, 2017
S&P SEPT FUTURES (SPu7)
2472-3, 2459-60, 2455, 2438 Support
2490-1, 2500-5 Resistance
SPX - (2-3 Days)- Bullish-Upside looks to extend possibly to 2500-5 for SPX, with rally potential between now and Thursday's close. Prices should be watched carefully for any evidence of reversal, and selectivity is important at this stage of the rally. Undercutting 2443 would help S&P move down to retest lows.
SX5E- EuroSTOXX 50- Bullish- Near-term gains look likely given Monday's breakout of the trend from May, which unless reversed right away on Tuesday/Wednesday and back UNDER 3433, has to be respected. Near-term resistance lies at 3515-25.
HSCEI- No Change- Bullish- Rise to new multi-day highs after minimal pullback keeps bullish bias intact. Final push higher up to near 11550-600 likely which could be used to sell into.
Trading Longs: FXI, VAR, AMGN, HAL, NSC, UNP, ORCL, HLT, HP, HPQ
Trading Shorts: GLD, SLV, DIS, LEG, BBBY, AIZ, LNC, VIAB, COH, KODK
Monday's ability to exceed the highs of the past four trading days on above-average breadth was thought to be a minor positive for SPX, and despite the ongoing issues with momentum (which won't go away anytime soon), we saw both Tech and Financials show excellent participation yesterday. Given that Semiconductors led the performance among the secondary groups, and SOX still has a half-way decent technical pattern which can allow for upside, it's thought that Technology might attempt a final push into mid-to-late September before peaking out. Financials also showed sufficient strength to get right back to important downtrend line resistance along with Treasury yields which should be important in the days ahead (and Necessary to exceed to keep the financial rally going)
What was important yesterday largely revolved around the degree that safe Haven trades reversed all in unison. We saw Treasuries and Precious metals decline at the same time as the Japanese Yen , which had all largely rallied in weeks prior coinciding with the uptick in North Korea tension and uncertainty regarding the US recent natural disasters with two different hurricanes striking land within two week's time. The degree to which these might cause economic harm is beyond the scope of our technical thoughts, but certainly important three months down the road for the possibility of any December hike. (Odds at this point remain just 35% for a hike in December, and lie <1% for both September and November.) Given that the Fed doesn't like to disappoint the market, there shouldn't be much talk of any hike until we see data improvement ahead of December, (if and when that occurs.) Any stock market pullback in October is likely to reduce the odds further that any further hike happens this year.
Technically, it's worth making the point that DJIA and SPX charts both show the chance for a bit more upside, along with USDJPY, while Gold and Silver look likely to extend recent declines and weaken in the short run, coinciding with USD strength. Treasuries along with the yield curve will be an area to watch carefully in the days ahead for evidence of upward progress and breakouts of trendlines in XLF and TNX, or whether these get repelled. Overall, while its a MUST to remain vigilant in US stocks at this time, Monday seems to have taken a bit of the near-term pressure off, for the time being.
Additional thoughts and charts found below
Yesterday's rally exceeded the highs of the prior four trading days to advance up to test intra-day peaks made in early August near 2485. This area is indeed important in the short run, but yesterdays' move was definitely seen as a near-term positive given the degree that breadth expanded, (which at one point was 5/1 and finished still greater than 3/1 positive) Technology, Financials, Materials and Energy all rose greater than 1% in trading, and provided at least a near-term positive backdrop for this rally, which historically had been failing to show much strength out of Financials, nor Technology. Movement up above 2485 has targets at 2500-5, but we'll need to see more evidence of breadth and momentum expansion to have real confidence of a longer-lasting bounce in this seasonally weak time. Any reversal from here back down under 2443 would be equally respected as being a warning for downside acceleration to come.
The STOXX 50 index made some good progress Monday, breaking out of the entire trend which held this in a tight downward channel since most of Europe peaked out during the middle part of May. This is at least a near-term positive for Europe, and while the STOXX 600 and DAX still have some "work to do" in this regard to match this breakout, it bodes well for at least a minor European stock market recovery after a lengthy period of consolidation and "downward" bias since May.
Treasury yields popped on Monday which largely led US stock futures higher along with the Financial space which rose nearly 1.75% on the session. Both TNX and XLF rose up to very important areas of near-term resistance which will be important to surpass in the days ahead to have any confidence in the Financial sector continuing its recent rise. Note that this area also coincides with prior yield lows from back in June. Key area for XLF lies at 24.70. In the short run, given last Friday's reversal and Monday's yield gains, this area should have some importance, and be watched carefully, which lies near 2.12-3% for TNX.