February 2, 2017
S&P MARCH FUTURES (SPh7)
2262-3, 2254-6, 2260-2, 2246-8 Support
2277, 2281-3, 2289-90, 2298-2300 Resistance
S&P Futures: (2-3 Days) Mildly Bullish- Despite the minor stallout, willing to stay bullish above 2262, thinking that a push higher can happen, largely based on technology. Pattern though on hourly charts does suggest a minor pullback could happen into Thursday unless 2277 is recouped. For now, it doesn't look serious. Above 2287 on a close should lead higher above 2300 to 2315. UNDER 2262 on a close merits caution.
SX5E- EuroSTOXX 50- Bullish- Favor a snapback to 3300-10. The decline thus far hasn't taken too much wind out of the sails and unless 3230 is breached on a close, still right to favor a rally back.
HSCEI- Neutral, turning to bearish on a move under 9671. For now, no evidence of any real downturn, just a stalling out, so will continue to respect this recent move.
Longs/Shorts for a 3-5 day period:
Technical Longs: AMGN, EW, DXJ, BAC, BCS, ENDP, ABT, TECK, KMT, URI, MTB
Technical Shorts: WMT, TAP, MNST, HRL, XRT, PRGO, KSS, BBBY
Markets continue to demonstrate a real sense of offbeat rotation which seems to keep prices afloat while different sectors take turns leading, allowing the broader indices to stay afloat, amidst uneven lackluster breadth data. Wednesday saw prices attempt to follow-through on Tuesday's resilience, which looks largely to have failed, yet prices didn't really show much change, outside of the continued rally in Technology. Treasuries rallied shortly after the FOMC meeting, which managed to take the wind out of the sails from Financials, while the Dollar index managed a mild comeback. Overall, with Technology and Healthcare both rallying and Financials "hanging in there", It's truly difficult to be all that negative on stocks, despite Wednesday's data coming in less than stellar. Utilities and Real Estate both lost over 1%, and the general theme looked to center around Yield sensitive stocks losing ground, despite rates not making much upside progress in the US. Overseas was a different story, however, with breakouts in the Spanish 10-year, following suit on what happened to Italian 10-year yields, and the net effect of all this global bond selling seems to still focus on Financials gaining ground and/or not losing lately while the Defensive sectors remain under pressure.
The net effect for stocks continues to paint more of a positive than negative picture, with Technology leading every sector outside of Materials, but still turning in a strong 4+% for the month. Stocks do look to be tiring, yet with Financials, Tech, Healthcare holding up, and yields moving gradually higher with economic data growing stronger amidst a subdued sentiment picture, we'll need to see more proof to turn bearish.
Additional thoughts and charts found below
While many areas of the market have indeed begun to show signs of fatigue, one quick look at the NASDAQ goes a long way towards showing us why this market continues to hold up amazingly well. NDX managed to hold where it needed to Wednesday, and traded well up off its lows, finishing within striking distance of former highs with a very steep ongoing bullish pattern of higher highs and higher lows. Until something about this picture changes, (that being a move down under Tuesday's lows near 5100 for starters), the trend remains bullish and looks to extend back to new highs. The S&P certainly is more choppy and much less upwards sloping. However, for now, the NDX should likely lead both on the upside and also downside. Failure to get meaningfully above former highs in the next week which turns back down below 5100 would certainly be addressed. For now, long positions are still recommended.
NASDAQ vs SPX has just broken back out to new highs, something which is important and bodes well for stocks in the near future given the pattern breakout which relatively speaking, resembles a Cup and Handle pattern. Additional near-term strength is likely for the NASDAQ Composite and NDX vs SPX
Apple's earnings (AAPL) certainly caused some excitement Wednesday, pushing the stock back up to within striking distance of 2015 highs. The stock has tended to move in 26-27 week cycles over the past few years, with Declines from 2/23/15-8/24/15, 7/20/15-1/20/16, 11/4/15-5/12/16, and 4/13/16-10/12/16 all spanned 26-27 weeks in length, while other Low to Low and Low to High relationships focus on 8/24/15-2/21/16, 2/24/16-8/22/16, along with 5/12/16-11/16/16 all being similar duration. Looking forward, extrapolating these times from highs on 10/11/16, and/or lows from 11/16/16 projects out to 4/11/17 and 5/17/17, which both stand to have some importance if these relationships hold. Additionally, it's worth noting that the stock peaked nearly two years ago at the same level and bottomed last year near this same date, so the period in late February certainly appears important for AAPL and the fact that it's rising into a two-year anniversary near the same price makes this doubly important from a price/time standpoint. For now, I expect AAPL to stall out and potentially reverse at end of month between 130-135 and any sharp movement into the dates mentioned in April and/or May likely could provide a turn.