April 29, 2016
S&P JUNE FUTURES (SPm6)
2065, 2060-1, 2050-2, 2026-9 Support
2086-7, 2097, 2105-6, 2115-6, 2123-5 Resistance
S&P Futures: Long SPM6- (2071 closing stop- 2060 intra-day stop)-Very tight stops here given late selloff, which has caused momentum to begin to really rollover on a short-term basis and will need a sharp burst higher at this point to prevent a 3-5% pullback, which should be buyable for a move back to new highs. Under 2060 leads to either 2049-52, or 2026-30.
EuroSTOXX 50- Near-term bearish on the break to multi-day lows. Downside targets lie at 3043, then 3009, with a maximum pullback to near 2970.
Hang Seng China Enterprise index- Bullish-Minor consolidation in HSCEI, similar to European and US stocks has not damaged its uptrend, and unless 8860 is violated, its right to stay bullish and expect a move back to April highs near 4365.
Attractive Technical Risk/reward Longs
STX, KO, TSN, PAY, GRMN, RIO, VALE, ESV, SGMS, SLM, PRAA, GILD, ETFC, NXPI, TXN, ADI, JOY, FIT, WB, FXI, VNTV, MRO, WMB, HES, APA, NAVI, SWN, LGND, MDT, KMB, SBUX, SAFM, BCR, BSX, DVN, ELLI, MSFT, NKE
Bullish, but extended- Buy Pullbacks- X, MBT, AEM, NEM, FCX, GDX, GG, TRXC, EBF, DG, CHD, OC, PM, MCD, AVGO, SONC, POOL
Attractive Technical Risk/reward Shorts: TRIP, MAT, GT, RHI, ANF, GPS, HTZ, CF, SPLS, USG, AWI, WDAY, CIEN, QLIK, LC, SQ, DF, ADS, BBBY, MNK, P, RL, CROX, FOSL, HOG, MYL (on bounce to 46.5-47)
Futures managed to squeak out a last minute rally to save indices from turning negative, but given the slowdown in the last couple weeks, indices lie at real make-or-break levels in the near-term and can't afford to get under 2060 without thinking a move down to 2048-52, or 2026-9 occurs. Daily MACD has been showing negative divergence since mid-March, and both McClellan Oscillator and Summation index have waned a bit. Yet Summation has not even breached its 5-day moving average, so indices still remain in a strong position, despite the minor slowdown.
Additionally, as mentioned above, its worth noting that on a weekly basis, we've barely even gotten down under prior week's lows, so indices remain in a strong position overall on a weekly basis, but have just stalled out near prior highs, which has affected near-term momentum.
Another key point to mention which has been detrimental concerns Technology, which has quickly lost ground since early April, and with one trading day left in the month, stands to the weakest sector in April of any of the major S&P GICS level 1 sectors with -4.62% through 4/28 vs +0.78% for SPX. The Philadelphia Semiconductors index (SOX) lies at key support, so the next few days will be key in this regard as to whether a minor breakdown occurs. Relative to the SPX, the NASDAQ has declined down to near February lows, relatively speaking to SPX, having peaked out again at lower levels than November 2015 in early April and now fallen for nearly four straight weeks. Certainly an important area for the NASDAQ and for Tech in the days ahead.
The decline in the US Dollar continues to be something to focus on, which is serving to drive outperformance in Value stocks along with precious metals, and that looks to continue in the weeks ahead. Though many metals peak out in mid-May and selloff seasonally speaking into July, this looks premature for now, and additional upside to near 18.50 looks possible for Silver and 1310 for Gold.
Both USDJPY and TNX are down to near make-or-break territory- 117.63 for Dollar/Yen and 1.80% for US 10-Year Treasuries, so some ability to recover quickly is essential in the days ahead and breakdowns by both would add to the likelihood of a correction in US Equities. Bottom line though, as has been reiterated over the last week, this "wobbling" in equities remains very much short-term in nature, and the weekly breadth and momentum remains quite strong, and should be able to power indices through the highs by end of May before any significant top.
Charts and comments below.
S&P has just breached the prior week's lows for the first time since mid-February. While not a hard and fast sell signal per se for US Stocks, it bears watching for signs that it could lead to at least a minor drawdown. For now, there should be ample support down near 2050 and below at 2026-30 area.
Often times it pays to watch McClellan's Summation index for signs of turns, as the deterioration in breadth can be easily discerned and often lead a pullback or rally in stocks with the divergences leading the way. In this case, we see evidence of higher lows back in October of last year compared to August, while starting in November, the Summation index began to "nosedive" warning that the rally was on its last legs. For now, the Summation index remains above its 5-day moving average with little signs of any weakness. A break beneath the 5-day would be the first signal which should be watched carefully and lead to at least a minor selloff in US Stocks.
DXY has pulled back down under mid-April lows which is a more bearish development technically, and suggests that additional downside to near August lows should occur,. This should prove to be bullish for Commodities and particularly the Metals complex in the weeks ahead while allowing Value stocks to outperform Growth.
Gold has begun to show increasing evidence of bottoming off recent support and turning back higher, which should allow for upward progress towards 1310 in the near-term, an area to consider lightening up into mid-May. For now, this daily chart shows the Ichimoku cloud providing decent support to Gold and now prices are beginning to lift in a fashion that should result in further upward progress.
The ratio of Growth to Value has begun to turn sharply lower in recent weeks given the decline in the US Dollar and should allow for further outperformance in Value as SVX outperforms SGX. this chart since early 2014 shows the break of long-term trendline support which is resulting in Growth weakening on a relative basis to Value (SGX/SVX- Bloomberg)
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