January 26, 2017
S&P MARCH FUTURES (SPh7)
2271-2, 2262-3, 2250-1, 2228-30 Support
S&P Futures: (2-3 Days) Bullish- Still no reason to sell just yet, despite the breakout and two successive days of followthrough. Counter-trend sells remain about 3-5 days away, so still right to stay the course, looking to buy dips, for now. 2300 IS an important level for S&P futures, which lies directly overhead. Buy pullbacks at 2271-2, and 2262-4 maximum for a move up to 2292, then 2298-2300.
SX5E- EuroSTOXX 50- Bullish- SX5E's rally should move a bit higher and has initial resistance near 3360.
HSCEI- Mildly bullish- Still looks like this should move higher to 9910-50, but increasing signs of stalling out which should make a rally there used for profit-taking.
Longs/Shorts for a 3-5 day period:
Technical Longs: CS, BCS, IYT, KMT, R, FDX, JEC, URI, MTB, FB, MAS, UPS, CMG, MLM, VMC, TBT, EMR
Technical Shorts: XRT, PRGO, KSS, BBBY, WMT
The breakout and subsequent follow-through are certainly constructive, technically, but are nearing near-term levels to sell which lie directly overhead. Breadth has improved, but still insufficient when trying to compare current participation with that which greeted the market back last March-July following the large breakout from February lows. For now, the trend still looks early to fade. A few things are positive and worth mentioning:
Materials and Financials starting to join the rally which was formerly centered on just Technology and Industrials, which is certainly more positive than negative, So participation is positive, and structurally the indices are in good shape with SPX, NDX, DJIA are all at new highs, not to mention IWM and TRAN, which last year, certainly wasn't the case.
The negatives have to do with overbought conditions now, with weekly RSI at three-year highs, while seasonality trends start to reflect a good likelihood of dropping post Inauguration in the month of February. Additionally, many global indices peaked in 2015 and are NOT following the S&P's move back to new high territory. This is also something which needs to be watched carefully. For now, the near-term remains constructive, but increasingly it appears that indices will need to consolidate gains before much further gains can ensue.
Sidenote: A word about DOW 20k : AS we all know, 20k is NOT that meaningful, outside of being a nostalgic level. Given that most newspapers will feature this story can typically boost sentiment, and embolden the current "long" investors which can lead to complacency. Additionally, it tends to bring about feelings of remorse from those which are not fully invested, and the net effect tends to be a quick rise in bullish sentiment
((Overall, the DJIA first hit 1,000 nearly 45 years ago, back in November 1972. Important to realize that "sometimes" these levels can be important, and sometimes obviously not. 19k certainly wasn't all that important, while the DJIA spent nearly 2 years hovering within 2% of 18,000 before rocketing higher. The market overall rose nearly 2,000 DJIA points from the Election, went sideways for a month.. and now has bolted higher yet again. Given that it took the DJIA just 3 years to go from 15,000 -20,000 but nearly 14 years to go from 10k to 15k is certainly worth mentioning.))
Charts and analysis below.
DJIA's gains brought this right near important overhead resistance, which lies near 20165 and could represent a challenging area of resistance Thursday/Friday after this DJIA 20k touch that's been widely publicized. Stocks like IBM, BA, CAT, DD were all up more than 4%. While the DJIA does look to be vulnerable on a counter-trend basis when considering the many charts which show Demark's TD 13 sells, we'll need to see followthrough lower before putting too much stock in any one signal.
Treasury yields have begun to trend higher in recent days, and look likely to test former highs made back in December near 2.63%. For now, yields have begun to sprout higher in US and also in Europe, Asia, so it looks to be a global phenomenon.
US Financials finally showed some evidence of strength in XLF's ability to close at the highest daily close of the year, slightly below former highs from December 2016. While a near-term concern that this has become overbought in just the last couple days, XLF has followed yields fairly closely and both look likely to extend technically. Relative charts of Financials showed strength prior to the absolute chart turned up, so both should be analyzed closely. For now, this group looks to continue higher and should be overweighted in the near-term given the rise in yields which looks to continue.
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