June 21, 2016
S&P SEPT FUTURES (SPm6)
2057-8, 2040-2, 2032-5 Support
2082-4, 2092-3, 2100-3 Resistance
S&P Futures: (2-3 days)- Bullish- Despite the late day pullback, S&P still made decent progress and held the area of its early breakout above 2074 for Sept futures on breadth of nearly 4/1 positive. the area at 2066-8 should prove important while movement under 2057 on an hourly close would likely suggest further downside to 2040-1. Resistance lies at 2079-80, then 2092, 2099-2100.
EuroSTOXX 50- Bullish- Monday's rise back over May lows is seen as a positive and even on pullbacks, technically it looks like last week's lows probably hold for now and give way to movement back up to 3150.
Hang Seng China Enterprise index- HSCEI held key trendline support and then made new multi-day highs on Monday, which should benefit from strength in European, US markets to potentially show some follow-through- Areas up at 8816 area important and then 9058
Attractive Technical Risk/reward Equity Longs
TSN, AMT, MKTX, CRL, WAT, MDT, TXN, WBMD, HAS, INTU,CRM, DY, RTN, KAR, HEI, FIVE,VSAT, AVGO
Attractive Technical Risk/reward Shorts:
FL, UAL, TIF, ERIC, ROP, AAL, GES, ZUMZ, BBBY, GME, SIG, RL,TAN, FIT
1) US Equities should be in the process of turning back higher. Despite the late day selloff, markets still advanced with breadth of around 4/1 positive, as Yields, and European stocks led the charge, with European indices reclaiming areas that were important in being broken to the downside. The US Dollar will have to be watched carefully in the days ahead, but for now, the after effects of Monday's close seem far more positive than they were heading into the week after last Friday's move. Dips should be bought, thinking that equities can start to push higher, which should be led by Discretionary and Industrials, two groups which both made progress today and are encouraging as signs of Risk-on Sector rotation starts to begin again.
2) JPY should have limited downside from here with targets at 102.50-.75 max before this turns back higher. and rallies back to near 110. As of yesterday, US Dollar vs Yen turned lower intra-day which largely coincided with S&P turning back down, despite Crude and TNX being higher throughout the session yesterday. For now, technical reasons to consider buying USDJPY ahead of any July stimulus focus on the degree of oversold conditions in momentum along with counter-trend Demark indicators within 1-2 days of lining up as BUYS after severe downside exhaustion. So it's important to keep an eye on USDJPY along with TNX and Crude. Ideas as to how to play an upcoming move lower in the Yen, or higher in US Dollar vs Yen involve buying YCS, or selling FXY, the Currencyshares Japanese Yen Trust which is based in Yen.
3) Gold seasonality would tend to suggest a sharp pullback could be in order which would be confirmed on a move back under 1277 on a closing basis. CFTC Non-commercial Specs have accumulated nearly 280k contracts of Gold, which looks to be the highest ever, as of 6/14/16, higher than 2011, as most are making the comments these days that they finally "Understand" the allure of Gold given negative interest rates. Heavy volume was seen in the Put options on Monday in Newmont Mining (NEM) , which could allow for a larger pullback in Gold and mining shares if Gold slips back under 1277 in the days ahead, following the BREXIT vote.
S&P futures spiked sharply this am, and then managed to retrace nearly the entire move into the close, in what many called a successful reversal. Technically though, it looks premature to call this a failed breakout as uptrends remain intact from last week, and prices thus far seem to have held the area at prior highs that was exceeded, near 2074 in September Futures. At this point, given that USDJPY looks close to turning up and European shares have made progress, this rally today still needs to be given the benefit of the doubt, particularly given the uncertainty. Under 2057 would call for a test of 2041 in ESU6, but for now, most investors remain perplexed as to why equities might rally ahead of an important vote, which is precisely why many might choose to position long, thinking the fears are overblown.
STOXX Europe 600 index, the benchmark for European equities, had a positive development ahead of this week's BREXIT vote given the move back above 330, which helps to recoup the prior lows that had been breached. This should allow for European shares to rise further in the days ahead, particularly if FX options activity seems to indicate that BREXIT chances are growing even smaller.
The Japanese Yen looks to have gotten a bit too stretched vs US Dollar in the last week, undercutting prior May lows and settling just above important support at 102.50-103 which should cause this to stabilize and turn back higher. For now, momentum has gotten stretched, along with counter-trend indicators like TD Sequential and TD Combo close to showing completed 13-buys within the next couple days. Given that a rally in USDJPY typically coincides with risk assets also doing well and a lack of BREXIT occurring likely should serve as a catalyst for those who sought the safety of the Yen to sell ahead of next month's monetary stimulus.
Gold Speculative longs as per CFTC data for Non-commercial Specs looks to have risen back to a new all-time high record as of last week , with a net 279862 long contracts, which exceeds the prior record held in 2011. This prior record also occurred right near the infamous 2011 peak for Gold, so it's worth watching longs with a certain degree of caution given the size of the Spec longs at this time. Under 1277 would result in a sharp drawdown in Gold which could pullback to 1200 or lower, likely coinciding with a rip in the US Dollar index. While gold has looked attractive for the last few weeks as a trade, the combination of its churning near the highs, and stalling out in a pattern of higher high, lower low type Broadening formation on daily charts while Spec longs have gotten excessive is reason to believe this might be a crowded trade near-term.
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