August 23, 2016
S&P SEPT FUTURES (SPu6)
2175-6, 2165-6, 2160, 2139-41 Support
2190-1, 2200-2, 2208-10 Resistance
S&P Futures: (2-3 Days) Bullish- Monday marked the fourth straight day that prices rallied well up off early lows. Movement up to challenge last Monday's 2186 close (2190.75 High) looks likely in the next few days with larger targets near 2210-2220 possible before this rally stalls out in greater fashion. To reiterate former areas of importance, unless 2167 is breached on a close, it's right to buy dips and expect 2189-91 to be tested and taken out in the days ahead.
SX5E-Bullish, with targets near 3100-3150 into late August- Similar to last week's thoughts, the pullback in SX5E really hasn't done much technical damage. Recent weakness should represent chances to buy dips with thoughts that 3100 and then 3150 can be tested in the weeks ahead prior to any real top. Only bearish on move under 2890.
HSCEI- Bullish- Inclined to think pullback has nearly run its course here, and like owning here and buying any further decline into 9500 for a move up over 10,000.
Longs/Shorts for a 3-5 day period:
Technical Longs: PX, EA, FLR, QCOM, PCLN, YUM, CHK, FLT, APD, PXD
Technical Shorts: RCL, TRIP, GOOGL, PM, MO, COH
Similar to prior days in the last week, European indices closed mixed to lower in Monday's session, while the SPX managed to claw its way all the back to near positive territory by the close. This now represents four straight sessions where prices have successfully bounced hard off early lows to close at or near positive territory. A move higher to test last Monday's highs looks likely in the days ahead, or 2190, and fading US Stocks here continues to look premature.
Bond yields have begun to turn down with a bit more force of late while the US Dollar looks to be having difficulty in holding gains, as evidenced by Monday's close well down off its highs of the session. Crude fell nearly 4% on the day, which caused Energy to underperform all other nine major Sectors in the S&P GICS Level 1 category. Overall, not much true change based on Monday's session, but some evidence of Emerging markets starting to wane a bit while Crude oil corrects its near-term overbought state.
Overall, both stock and bond markets continue to churn, with little or no sign of any real trend since mid-July. Rallies in both stocks and bonds look likely in the next couple weeks, and any breakdown of consolidation lows for Treasury yields very well could coincide with Financials starting to weaken again, which might stymie any rally efforts. For now, it pays to be bullish, until some type of real proof is at hand.
Some charts and additional comments below
Emerging markets have begun to show mild evidence of rolling over, as Monday's EEM close was the lowest since August 8, nearly three weeks ago. Additional pullbacks look likely on a 1-2 day basis, while evidence of the US Dollar index breaking down again could likely help EEM stabilize and begin to show signs of moving back to recent highs.
WTI Crude's near 4% loss in trading Monday looks to have another 1-2 days of weakness, but should take the form of the minor correction into mid-August which proved brief before moving back to new highs. Areas to buy dips lie just below $46 and should be considered good support on pullbacks.
Bond yield curves have begun to break down a bit more severely in recent days, with 10s/30s and 2s/10s hitting new closing lows for the year. Additional flattening looks likely as a result of recent closes under the lows of this bearish technical pattern, and would expect that both 10s and 30 yr yields pullback to take out recent lows. This would suggest that TLT could work well for longs, and/or TBT for shorts.
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