June 9, 2016
S&P JUNE FUTURES (SPm6)
2107-9, 2101, 2082-3, 2075-7, 2065 Support
2120-1, 2125-6, 2135-6 Resistance
S&P Futures: Trend bullish, and overnight weakness did little to erase the bullish pattern that's been in place since prices bottomed in mid-May. Movement down under prior lows is necessary to expect additional pullbacks and for now, minor drawdowns are a buying opportunity. 2120 is key on the upside and getting over this level will fuel further gains.
EuroSTOXX 50- Pattern in EuroSTOXX looks increasingly more negative in the short run and far more bearish than what's seen in the US. For now though, prices remain locked in range-bound action since March and have trended down in June thus far while US prices have moved higher. 3094 is important for upside while 2883-5 defines downside support.
Hang Seng China Enterprise index- Bullish , and gains of late have exceeded minor trendline resistance from last October, with 9174 important on the upside and then 9300 near April highs. Emerging markets and China both are bouncing given the weak US Dollar
Equities- Attractive Technical Risk/reward Longs
WAT, MDT, ABBV, AET, ALXN, HSIC, TWTR, EA, IGT, WBMD, HAS, AYI, MXL, THO, CRL, SWHC, INTU, WOOF, CRM, MKTX, DY, CETA, LAMR, ORIG, AMZA, FET, TMO, RTN, KAR, CB, HEI, IT, FIVE, CRL, GPN, DG, TXRH, UNH, GD, MLM, VSAT, AVGO, CVS, NOC, CL,TSN, NXPI, TXN, CVC, WB, LGND, SBUX, SAFM, BCR, BSX, CCRN, FRPT, DVA, AMZN
Bullish, but extended- Buy Pullbacks- BSFT, TAP, TWC, AVY, MO, CB, FISV, NOC, LLL, JEC, BGS, NSP, LMT, VMC, AMSC, FIS, MBT, AEM,TRXC, EBF, CHD, OC, PM, MCD, SONC, POOL
Attractive Technical Risk/reward Shorts: DV, CONN, KMX, SHLD, HZO, GME, KONA, HOG, GES, ZUMZ, SIG, RT, TIF, RL, LC, WDAY, BBBY, XRT, ANF, MOH,FL, SPLS,TAN, FOSL, AAP, VSLR, PTEN, GT, GPS, HTZ, CF, SHLD, AWI, CIEN, SQ, CROX, EFOI, CSIQ, FSLR, FIT
Equities continue to show signs of resilience, with prices having pushed back over Tuesday's highs by the close on Wednesday for SPX, while the NY Composite closed up at the highest levels since last August. Signs of stalling out have occurred in the NASDAQ over the last week, though consolidation only and no real signs of weakness. While sentiment is slowly growing more bullish and near-term evidence of overbought conditions are getting closer, they're not yet at levels which would suggest any kind of imminent reversal. Pullbacks which arise given a lack of cycle confluence along with lack of counter-trend sells per Demark and no overbought conditions, or resistance as prices push into new high territory are simply chances to buy dips, and can't be considered all that serious.
Bond yields however are teetering on the brink of breaking down under prior lows set a few months ago in the US, (looks to be happening early Thursday) which occurred yesterday in the UK, and follows a trend that's been happening globally in the last seven years. According to Citigroup, world government bond yields hit a record low of 0.7539% according to the World Government Bond index comprising 23 countries. While Europe has faltered in recent days, the US has ignored this and moved higher in tandem with bonds, which at some point will likely reverse course. For now, precious little evidence of either bond yields rising, or stocks falling, and it pays to stick the course.
The US Dollar remains trending sharply lower in the near-term, though has begun to bounce a bit overnight (which might allow for some backing and filing in commodities after their own sharp move. Energy has broken out to new monthly highs in relative terms, while Materials are on the verge and should also follow suit. Utilities meanwhile broke out last week and should continue to offer above-average signs of outperformance given lower yields, which also doesn't seem to be ending. Bottom line, the combination of the divergence in which US indices are above April highs, or right at key levels, along with Yields pulling back sharply aren't sufficient reasons to think selling into this rally and stepping aside make sense. For now, all three sectors offer above-average signs of strength and look attractive technically as stocks continue to press ever higher.
Charts and additional comments below
S&P remains in very good shape technically, with overnight weakness not causing nearly any real technical damage. Closes under 2106 would be the first short-term sign of a possible pullback, but until/unless this occurs, its right to still lean long and favor a move back higher to test and breakout above 2120 in the days ahead.
Materials are another sector on the verge of making minor relative breakouts, following suit to what happened in Energy earlier in the week. While oversold bounces in DXY might limit this near-term, the technical structure remains supportive, and dips should be bought in Materials for an upcoming relative breakout which should favor owning XLB for outperformance.
UK Gilt yields have broken down to new all-time lows on late Wednesday/early Thursday morning movement down to 1.22%. Charts remain "broken" technically, and suggest additional buying in Gilts/selling of yields, which should drive yields down under 1.20 in the weeks to come.
US Treasury yields are now following suit to what's happened in Gilts along with Bundyields pressing lower, and a break of 1.70% in TNX is important and negative, which should be watched carefully given prior positive correlation with US Equities. While this correlation has broken down a bit in the last couple months, a violation of key support which has held since April could definitely put more pressure on Financials in the near-term, which might serve as an understandable further headwind for Financials, while favoring Utilities outperformance. (See most recent note from 6/6/16, the Weekly Technical Perspective, which highlighted Utilities.
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