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Stocks weaken with WTI Crude into NFP

April 1, 2016

S&P JUNE FUTURES (SPm6)
Contact: info@newtonadvisor.com

2040-2, 2032-4, 2020-2021, 2004-5 - Support
2063-4, 2075-7. 2080-2-, 2105-7      - Resistance

Key takeaway heading into today's Jobs report centers on the fact that 2 of the 3 assets which correlate strongly with S&P have turned down, that being WTI Crude oil along with US 10 Year Treasury yields.  Both of these have broken key support in the last week and trended lower while equities remain largely intact.  

Stocks have begun to stall out a bit, not only over the last week, but have lost some momentum on this rise starting at least three weeks ago, as the slope of this advance from mid-February has gotten increasingly flatter.  Patterns have gotten overbought in the last week, and despite some minor consolidation, really haven't shown any evidence of falling.  Trends remain bullish, but momentum continues to wane, and appears like a larger move is coming given the brief flattening out in volatility after a very volatile January and February.

Yet, we've seen no evidence of any real pullback that lasts longer than three days before prices charge back up to the highs.  Indices are stretched, and lie less than 1% under November highs, having hit highs for 2016 in this last week, but are still moving in an upward trajectory.  Overall, the near-term area to watch lies at 2040 and then at 2020.  Unless 2020 is breached on a close, selloffs post NFP should be used to buy, thinking that a move up to 2075-80 can happen before a larger area of resistance appears.

Early morning weakness thus far has taken S&P down to just above initial 2040 support, but i would suspect a deeper retrace is possible, with areas in the low 2030s- near 2032-4, aligning with the one-month trend, or down at 2020 which is the larger "Line in the Sand"  If this latter area is broken, a larger pullback should get away, and a bearish stance would be right in the near-term, expecting a pullback down under 2000 to potentially 1960-70 before reversing.  For now, no meaningful trend damage has been done, but merely a stalling out which has largely coincided with what breadth and momentum have been showing in the last week.


 

Key support lies near 2040, then 2032-4 and then 2020.  For now, no meaningful weakness has been seen, as prices have held up ahead of Friday's NFP.  A break below 2040 would be the first signal to pay attention to, but even then, important to see an hourly close, and not just a 1-5 minute brief spike.

Momentum was waned a bit, which can be seen in the flattening out in prices over the last few weeks.  Key support lies near 2020, illustrated by the Blue Arrow above.

An overlay with Crude and SPX shows the ebb and flow in prices that have tracked very closely in the past month up until about a week ago when WTI Crude broke down and SPX moved back to highs, which now seems to be fading.  Breaks of 2020 in S&P futures would put S&P back in line with how Crude has traded in recent days.

WTI Crude lies now about $4 below former highs after its stealth selloff in the last week, which was documented at the time, but gave way to several shakeouts before trending lower more meaningfully in the last week.  Additional weakness looks likely, which could cause SPX to also show deterioration given the correlation of late.  Support lies near $36 and then $34.50-$35.

US Dollar index weakness is shown in its reciprocal form, that being the Euro strengthening vs US Dollar, which has broken out of resistance in the last few days and should trend higher to up near 1.17.   Given that US Dollar likely will show some volatility after the NFP number, its important that prices hold gains, but technically this is a bullish move in EURUSD, and should likely demonstrate some upside follow-through.

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