April 7, 2016
S&P JUNE FUTURES (SPm6)
2034-5, 2020-2021, 2004-5, 1956-60- Support
2063-5, 2071-2, 2090, 2102-4 Resistance
S&P Futures: Bullish above 2035- Upside target 2090, 2130-40
SPY: Bullish above 204- Upside target 209.33, 210, 214
US 10-Year Yields: Bearish- 1.55 near-term target- bounces likely held at 1.86
German Bund Yields- Bearish under 18 bps, bounces held near 24-25 bps. Under 8 bps = 5bp tgt
Euro STOXX 50- Bearish- Oversold bounce possible, but likely held near 2985; Target 2750, 2675
HSCEI- Hang Seng China Enterprise index- Mildly bullish above 8600, adding conviction on close >8800- Stop <8600 on close
WTI CRUDE: Bullish above $38, which could allow for upside folllowthrough- Bearish (Under, on a close)
USDJPY: Bearish below 111.30, Target 107.70, eventually 102
Attractive Technical Risk/reward Longs for 3-5 days: (Breakout/Trend Following (TF):
VNTV, LGND, MDT, KMB, SBUX, SAFM, BCR, BSX, DVN, HES, MRO, NFX, APA, ELLI, MSFT, NKE
Bullish, but extended- Buy Pullbacks- TRXC, EBF, DG, CHD, OC, PM, MCD, KO, AVGO, SONC, POOL
Attractive Technical Risk/reward Shorts for 3-5 days: BBBY, P, RL, CROX, CF, VLO, TSO, FOSL, JWN, HOG, HTZ
S&P managed to snap back after testing 2035 for the third time Wednesday am, largely following the move in WTI Crude higher, despite the weakness in the US Dollar vs Yen (which broke down under key 111 support while the NKY continues to drop -17% over first 14 weeks of the year ) Treasuries sold off fractionally, while Precious metals and the US Dollar index were both mildly negative. Healthcare outperformance served to help the NASDAQ and continues to make headway (Discussed here recently) while Energy and Materials also showed good relative strength. Telecom lagged, though the underperformance here looks to be largely dividend related, but we have seen some recent underperformance in the defensive sectors in the last few days that adds some conviction to the idea that stocks can still make upside headway.
Overall, the intermediate-term breadth and momentum still remain quite strong. We have seen both of these lag a bit in recent weeks, (Most topped out right about when US Treasury yields peaked out on March 16, just above 2.00%), but indices have failed to show more than two days of weakness before ripping back up to near Monday's highs. SPX futures spent an entire "1 day" trading under their 10-day moving average before managing to close back above. The NASDAQ Composite, meanwhile, make a new closing high for 2016. Until we see more evidence of weakness in stocks, it still looks right to favor upside in the indices, and think that a retest of last November highs is not too far off.
From a sentiment perspective, many continue to highlight TECHNICALLY the area near 2090 as having significance for S&P , with other indices having resistance at or slightly above current levels.(DJIA-17800, The fact that many are willing to point out areas where the indices should FAIL is seen as a bullish indication from a contrarian perspective, as at true tops, very few are willing to "Stick their necks out" and point out the negatives
What DOES still remain a concern? 1) Underperformance in Financials.. 2a)Treasury yields still down near their lows, under 1.80% after falling nearly 25 bps in three weeks.. 2b) Bund yields down testing last April lows (managed to rebound a bit Wednesday, but still quite low, and bearish) 3) US Dollar's pullback vs Yen, with the flight to safety. or Yen buying completely going against BOJ's hopes during a NIRP period, and their own NIKKEI having dropped more than 17% in the first 14 weeks of the year, or greater than 1% a week. 4) Fed Uncertainty 5) Lackluster Earnings season where continued, ongoing revenue shortfalls might eventually have an impact on the market (FOR now, causing more of a wall of worry that's serving to fuel this rally with a literal PLETHORA of negatives) 6) Technical crosovers of some popular momentum gauges like MACD, and McClellan Oscillator breaking down
Overall, it remains a market of a LOT of moving pieces, and more than ever, many of these are moving in directions that historically have NOT coincided with rising stock prices. However, until we can see evidence of prices turning down.. Trends are bullish, and worth sticking with indices in the bullish month of April.
S&P futures bounced no less than three times from 2034-6 from Monday morning. This area will continue to be important in the days ahead and any move down below at this point should extend.
For now, movement back up above the prior days highs has taken S&P up to near 2060, and showing some symmetry vs prior highs. Trends remain intact, and despite this hourly pattern appearing to resemble a Head and Shoulders pattern, it would require a move back down under 2035. Until this happens, the trend remains bullish, and breakouts back to new highs are more likely.
S&P momentum waning, but really no signs of any real price deterioration, and thus far, all the things that "should" have caused price to fail, have not. Movement up to near 2090 should occur, which would represent more substantial resistance, or roughly 30 S&P futures points higher.
WTI Crude's move back above $38 allows for further upside in the days ahead. $37.75-$38 remains the key level and above is positive, below, negative.
The sharp 7% move in Biotech has taken the XBI to right up near initial resistance, and selectivity is important in the days ahead, given the extent of this move in the past few days. Overall though, a definite positive to see Biotech begin to trend back higher, which would grow more bullish on the ability to exceed these trendlines drawn from former highs and lows.
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