December 21, 2016
S&P MARCH FUTURES (SPh7)
2253-4, 2242-3, 2232-4, 2222-3 Support
2279, 2286-8, 2295-2300 Resistance
S&P Futures: (2-3 Days) Bullish- NO CHANGE- Movement up above 2264 should help S&P push higher to test 2279 and above. On the downside, 2242 is support, and under would bring about a 2-3 day pullback.
SX5E- EuroSTOXX 50- Bullish- NO CHANGE- Prices still look to move a bit higher after the 50% retracement of the 4/2015-2/2016 decline didn't produce any real resistance other than a minor stall out. Until/unless 3209 is breached, it looks likely that prices can still move higher.
HSCEI- Neutral- Prices have reached prior lows, but still no real evidence yet of an immediate bounce. We'll need to see some signs of stabilization in the days ahead.
Longs/Shorts for a 3-5 day period:
Technical Longs: KRE, TBT, QQQ, NTAP, CTXS, ADI, UUP, EUO
Technical Shorts: WYNN, AET, HUM, XRX, CRM, YHOO, AWI, VFC, KODK, DDD, FOSL
As we move into the Winter solstice, or the shortest day of the year for North America, equities continue to show signs of resilience. With just seven full trading days left in the year, most US indices are back at new all-time highs, while the DJIA closes in on another historic landmark, Dow 20,000. Given that it took less than two months to rise more than 2,000 points, without even stopping for a breath at 19,000, this move has certainly come about very quickly, defying expectations and emboldening those who are long stocks. For now, additional upside still looks likely over these final days, but is growing increasingly stretched, and up to targets where much further upside should prove difficult into the new year. The Combination of overbought conditions, counter-trend sells per Demark, and bullish sentiment are all likely to take a toll on stocks in the month of January. For now though, yesterday's move above 2264 likely spurs on further strength given that DJIA and NASDAQ are back at new all-time highs while the SPX is within 2 points.
When considering Dow 20k, as we all know, it's much more psychological than important technically speaking. It took just three years to go from DJIA 15k to DJIA 20k, yet 14 years to go from DJIA 10k to 15k. In that same token, DJIA 1000 was nearly hit back in 1966, but wasn't officially surpassed on a daily close until 1972, but just briefly before the horrific 1973-74 bear market took hold. It was not until 1982 that this historic 1,000 landmark was surpassed for good. The mentioning of these levels, however, DOES play a critical role in giving conviction to those that are long, while nudging others to join the party, at often the exact wrong time. Sentiment tends to grow around round numbers, which is largely Media-driven. Finally, with regards to the DJIA, it IS significant to keep track of this price-weighted index, despite stocks like GS carrying the heavy load for the DJIA of late. DJIA tends to correlate very positively with SPX and the divergences created by confirmation, or lack thereof tend to be important. Given my thoughts of stocks potentially peaking out at end of year, technically, I think it's more likely that 19k is revisited before 21k is hit.
Outside of equities, the US Dollar index and Treasuries are two of the more important assets to keep a close eye on, as Dollar/Yen is showing signs of getting stretched along with Treasury yields at the same time as Equities. Counter-trend sells are close to appearing on both of these, and it could well be that given that all rose in unison, a similar drawdown should also happen simultaneously, as the pullback in yields in the weeks ahead is likely to have a damaging effect on Financials. For now though, it looks premature to call "FIRE" in the theater ahead of the holidays, and it looks likely that we probably can push a little higher, helping sentiment to widen out even more into 2017.
S&P futures hourly charts show the progress that was made on Tuesday, with prices pushing back up to within striking distance of new highs yet again. This takes the shape of an ascending triangle pattern, and should allow for brief new highs, as technically it's seen as much more constructive, then Bearish. The pullback attempt last week , after breaking this minor uptrend, really gained no traction whatsoever, and simply grinded sideways for the last week before pushing higher Tuesday. For now, the path of least resistance still looks to be higher.
DJIA lies just 25 points away from 20k, a level that's sure to be hit in the next three trading days, today included. For now, Tuesday's push back to new high territory argues for a bit more upside into end of year, with targets near 20115, but is unlikely to continue upwards uninterrupted given the combination of upcoming counter-trend confluence between daily and weekly charts while Weekly momentum gauges like RSI have reached the highest levels in three years. For now, technically, we're overbought, but quite stretched and closing in rapidly on near-term targets.
Gold has nearly retraced the entire advance from this time last year, when it bottomed out at nearly an exact one-year anniversary to today. The last few Decembers have proven sub-par for Gold, and this one is no different. At present, we look to be "close" but still not there in regards to reaching downside targets, and Gold looks to have another 2-3 weeks of potential downside which could in fact make a complete retest of last year's lows. For now, counter-trend traders should be alert to try to buy dips on any move to 1100 or below as this should be close to some type of tradable low into year end. However, the intermediate-term trend remains quite negative, as Gold has lost its uptrend and now getting back down into the prior range. Given the ongoing rally in the US Dollar which looks to continue into next year, further downside might very well be in store for precious metals in 2017. Key stops for any trading longs at 1100 or below lies near last December's lows at 1050.
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