April 8, 2016
S&P JUNE FUTURES (SPm6)
2020-2021, 2004-5, 1975-6, 1956-60- Support
2063-5, 2071-2, 2090, 2102-4 Resistance
S&P Futures: Bearish below 2035- Technical targets 2000, 1975
SPY: Bearish under 204- downside target 201.74, 200
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- Target 2750, 2675
HSCEI- Hang Seng China Enterprise index- Bearish under 8600, target 8350, 8260
WTI CRUDE: Bullish above $38.30, which could allow for upside folllowthrough to 40, 42; Bearish (Under 38) important support 36.75
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
Near-term, the trends look to have turn bearish with the break of support. Thursday's trading represented the first bit of proof that the US is finally starting to pay attention to weakness around the rest of the world.. S&P fell beneath lows from earlier in the week, violating 2034-5 in Futures and 2040 in SPX cash, as well as its 10 day ma for just the 2nd time since mid February .. Breadth expanded negatively, while treasury yields fell back under 1.70. The bigger story of the day concerned the weakness in USDJPY which fell down to near 118, a continuation of the breakdown which happened 3 days ago..
While USDJPY had lost some of its correlation to SP just since mid February, this breakdown in both yields and Dollar/Yen was bound to trigger some reaction in S&P given the recent deterioration in breadth and momentum.. Given that Europe had turned down dramatically in the last week, this was yet another factor that seemed to weigh on US stocks, with the sum of it all proving to be too much to hold up after a valiant effort in recent days. Overall, despite the global weakness in the last week, Thursday was the first real evidence of technical damage plaguing the SPX.
Bottom line, near-term weakness looks likely into early next week, but likely is to remain short-term in nature. Technically speaking, any drawdown likely fails to get back to lows right away how strong breadth and participation had been since mid February.. Those factors along with positive seasonality likely could limit the amount of technical damage, resulting in only 3-5 % damage before prices rise back to recent highs..
Overall the base case scenario is for ST weakness over the next week, then stabilization and rallies back to new high territory before any major top is formed.. While the long term trend looks to be in potential trouble given the extent of the damage, for now,most of this damage likely is postponed
S&P futures broke key 2035 support but managed to bounce back up to close right at that area. Overall, sufficient weakness has occurred to expect that some minor selling should take place in S&P in the days ahead, but this likely will be limited down to 2000 or 1975 into early next week. While the hourly pattern does in fact look fairly bearish, 2035 remains the real line in the sand
SP broke down under its 10-day ma along with breaking 2035 intra-day, and MACD continued to diverge wider, as seen on daily charts. Selloffs should prove short lived given the bullish momentum and breadth on an intermediate-term basis along with seasonality. For now, a bit more weakness looks possible into early next week.
Europe has taken the lead in turning down, having nearly given up 50% of its gains since mid-February. For now, additional weakness looks likely.
The late day snapback puts Crude still in a fairly good position in the short run. Above $38 allows for further upside in the days ahead. $37.75-$38 remains the key level and above is positive, below, negative. Gaining back above 38.30 should allow for acceleration back to test former highs in mid-March.
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