January 6, 2017
S&P MARCH FUTURES (SPh7)
2254-6, 2249, 2239-40, 2228-30 Support
2269-72, 2279, 2286-8, 2295-2300 Resistance
S&P Futures: (2-3 Days) Bullish- Pullbacks ended up being minor by end of day yesterday, and prices retraced nearly all the weakness to close up near highs, which is a definite positive-Movement up to near 2285 looks likely into 1/12 before any peak- Under 2239 is a negative and leads to 2228 and lower to 2223.
SX5E- EuroSTOXX 50- Bullish- No real weakness after the last couple days and prices should still push higher into early next week up to 3360. Europe remains the weaker of the two vs US, so still right to underweight STOXX 50 vs US.
HSCEI- Bullish - Prices reached targets at 9624, but yet still no real evidence of exhaustion here, and it looks like another 2-3 days of gains should still occur based on lack of Demark sells/exhaustion. Use minor weakness to buy and expect possible rallies to 9800-9900 max
Longs/Shorts for a 3-5 day period:
Technical Longs: LVLT, FSLR, VRTX, ALXN, WDC, MOS, EUFN, DB, URI, RTN, XPH
Technical Shorts: FOSL, TSCO, K, SIG, M, DRI, SYY, XRT
Equities managed to claw back after minor pullback attempts and yet again, S&P is positioned to make a run towards exceeding 2269-72 on Futures charts which would help prices accelerate up to 2285-90 into late next week. While the slowdown in breadth given the sideways consolidation likely will make rallies back to new highs "sellable" barring a very sharp fast move which would help momentum improve, for now there remains insufficient reason to think Equities peak just yet, based on price action alone.
Breadth was just fractionally negative even near yesterday's price lows, (3/2) which saw S&P bottom out near exact support where it needed to at 2254. While Small-caps suffered, along with Financials (the latter being important given the composition in SPX) there remains a lack of true technical damage with prices sitting up near striking distance of new all-time highs. Breadth finished far stronger on the first two trading days of this year vs yesterday's 3/2 negative, and the ability of Healthcare to come roaring back and Technology to a small extent takes some of the negativity away from the loss in Financials.
The key development Thursday was the decline in the DXY and TNX simultaneously which caused the surge in Emerging markets, and Precious metals. While these look like counter-trend moves, they do look to extend possibly another few days which would help yesterday's minor breakout in EEM and GDX along with Gold move potentially carry a bit higher. However, weekly and monthly charts remain in very good shape for DXY, so this minor pullback should represent a very attractive opportunity to buy US Dollar based ETF's like UUP and/or consider buying ETFs which give short exposure to the Euro vs Dollar, like EUO.
Charts and analysis below.
S&P hourly chart shows this entire range-bound/sideways pattern from mid-December which still hasn't hardly shown any real weakness, and should be well positioned to lift up above recent highs, which could cause some acceleration in the near-term. However, sentiment has begun to reflect overly frothy levels yet again, which could mean that any breakout proves short-lived. For now, it still seems right to favor the bullish case.
This breakdown in DXY has been brewing for more than a month, when the US Dollar index began to consolidate sideways after its runup. While Thursday's decline in the DXY does look to have a bit more downside, the weekly and monthly charts show 100-100.50 as an excellent area to consider buying the Dollar index and/or selling Euro vs USD, thinking that the US remains in much better shape economically and should experience further Dollar strength, as the FOMCs dovish words fail to change the strengthening economic picture in the near-term.
Gold, which is shown with Bollinger Bands, has moved clearly above the higher Band as of Thursday's close while not expanding too dramatically. This should provide limited upside to this move before it settles and nearly all of this Gold strength is due to the Fed's dovish stance that's led rates lower along with Dollar weakness. Both of these should prove short-lived given the ongoing bearish momentum in Gold. Upside targets were thought to be 1185-1200, but above lies 1219 which can't be ruled out. Gold would require a rally back OVER 1250 to expect a meaningful upside advance could be forthcoming. For now, this looks like a bounce to sell into.
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