June 22, 2016
S&P SEPT FUTURES (SPm6)
2074-6, 2067-8, 2040-2 Support
2086-7, 2092-3, 2100-3 Resistance
S&P Futures: (2-3 days)- Bullish- The rally continued to make ground and breadth has improved a bit to suggest a likely test and move above early June highs in the weeks ahead. For now, Resistance lies at 2079-80, then 2092, 2099-2100.
EuroSTOXX 50- Bullish-Tuesday saw a mild continuation of Monday's advance, and 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 looks tobe setting up for a larger bounce which would be confirmed on movement back over 9058
Attractive Technical Risk/reward Equity Longs
A, LRCX, TSN, AMT, CRL, WAT, MDT, TXN, HAS, INTU,CRM, HEI, FIVE,VSAT
Attractive Technical Risk/reward Shorts:
NEM, FL, UAL, TIF, ROP, AAL, GES, ZUMZ, BBBY, GME, SIG, RL,TAN, FIT
1) US Equities remain "Best in Breed" and the rally still looks to move higher in the short-run, regardless of the uncertainty and fear surrounding the upcoming BREXIT vote. The recent strength in Industrials, Consumer Discretionary and now Technology is important to highlight as the rally starts to broaden out a bit, and breadth continues to rise. Movement up to test and exceed 2110 looks likely.
2) Gold's pullback today was important, and negative, confirming the 1277 level as being important, Additional weakness looks likely in the days ahead, particularly if the DXY gets above 96. Near-term, while many remain fearful of how to position prior to the BREXIT vote, selling gold and Silver here technically makes sense, expecting further trend deterioration in the weeks ahead.
3) Bond selloff supports more weakness in Treasuries which could help Financials. The Selloff over the last couple days has helped the 2-year yield reclaim the area of its former consolidation, which many feared was in jeopardy of breaking down, while 10-year Treasury yields also recaptured 1.70% a big deal given the amount of weakness of late. This bond selloff should be particularly bullish for Financials
S&P has now reclaimed much of what was lost into last week, when prices pulled back to just above May lows. The resulting bounce in the face of BREXIT uncertainty can be called nothing short of resilient for Equities, and has occurred largely on strength in "Good" sectors like Technology and Consumer Discretionary, Industrials, while Financials perked up today on signs of yields rallying back. Overall, breadth has been improving of late and a move back over 2110 is likely in the weeks ahead, so pullbacks into, or after BREXIT vote should be used to buy.
US 10year Yields made decent progress in getting back over 1.70% in Tuesday's trading, which was important before as an area of support and now to resistance, which looks to have been exceeded. Without any guidance as to what the UK vote will be, Yields look to have made a fairly large reversal Tuesday and should continue to trend up, which in turn should be good for Financials and serve as a tailwind for stocks.
The Energy sector looks set for continued gains after rallying right back to former peaks after just a minimal amount of weakness in Crude over recent days which was immediately recouped. XLE vs SPX looks poised to push back to new monthly highs, and in the short run is in better technical shape than OIH when looking relatively to SPX.
Bloomberg Grains index showed more dramatic signs of downside acceleration on Tuesday, which resulted from sharp drawdowns in both Corn and Soybeans. Seasonality suggests this period in June is typically sub-par for Grains, but one should look to buy dips if prices get anywhere near 50-62% of the prior rally, as intermediate-term momentum remains quite positive as a result of the strength from February into early June. ETFs to consider buying on any further weakness in the weeks ahead to capture this dip in the Grains center around DBA.
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