April 12, 2018
S&P JUNE FUTURES (SPm8)
2624-6, 2606-8, 2584-7, 2552-4, 2532-4 Support
2659-61, 2676-9, 2688-9, 2708-10 Resistance
LINK TO TECHNICAL WEBINAR from Thursday 4/5- https://stme.in/tBobOtxUYL
Note- I will be attending the CMT Symposium in NYC today, 4/12, so there will be no Weekly call
SPX - (2-3 Days)- Bullish- Still difficult to make the minor decline on Wednesday out to be bearish and something that leads S&P lower. The trend of rising lows from 4/2-4 should still point to S&P moving higher to test and exceed recent highs at 2666-70. UNDER 2605 would negate this and warrant hedging
SX5E- EuroSTOXX 50- Neutral/mildly bearish- Wednesday's stalling out near the highs of the recent range wasn't that compelling for the bullish case, and one can make the case for some minor weakness. In the event, prices rise back above 3450, this would certainly change things for the better. Until then, Europe remains a difficult area to be long, particularly relative to the US.
HSCEI- Make-or-break on a 1-2 day basis- HSCEI has risen to 12420 which hits a trendline from January highs. Above would be quite constructive, driving prices up to 12821, while there could easily be some backing and filling after this recent rise. Overall, low conviction here, but above 12420 on a close would turn the near-term trend back to bullish.
Trading Longs: ORBK, ROL, WIX, MPC, SHOP, DDS, CAR, DBC, FXB, FXE, NDAQ, SQ, TWTR, AKAM, FSLR, GOOS, FIS, TJX, STZ, SHAK
Trading Shorts: AZO, EXPE, TSCO, HOG, LUV, AAL, MGM, UUP, EUO, SIG, CRK, SLB, PCAR, FL, BBBY
Long SPY 261 with initial targets 267-8, with over leading to 275. Stops under 258.
Long DBC for commodity exposure- $16.94 with targets $17.85
Long GBPUSD (1.4123) for move to 1.4370, 1.50, and Long EURUSD 1.2324 for a rally up to 1.265
Long XRT 43.50-44.50 for a move in the weeks ahead up to 47
Long XME 33.50 to 34.50 for a move to 37
Long XLV 81.50 or better with targets near 85
Long XLP 52.83 up to 54.50
Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Yet again we seem to have entered a time when quite a few "distractions" are happening at once, and yet stocks seem largely resilient to it all. The trade war possibilities might have diminished to some extent vs what was initially expected, but now geopolitical strife seems to have reared its ugly head yet again, and Trump's comments on Syria seem to have coincided with weakness in equities on Wednesday, while bonds rallied and gold threatened a larger breakout of 1365. The Dollar's decline seems to have found at least temporary support in trading meanwhile, while Crude oil broke out to the highest levels since 2014. Commodities continue to show above-average strength, and this looks to continue in the days/weeks ahead. Bottom line though, stock indices remain at levels seen back in late March, and have not sold off substantially.
Overall, the fact that fear looks to be on the rise, while indices still haven't broken down under February lows seems to be a positive in the bigger scheme of things for now. Breadth and momentum have begun to slowly rise, while groups like Technology have been starting to strengthen again along with Energy and Commodity stocks. Treasuries have gone exactly the opposite as what many suspected, but the drop in yields would need to violate 2.71% to think a larger bond rally is upon us. Interestingly enough, the bond market has been roughly just as range-bound as Equity indices have been since late March. Bottom line, insufficient weakness has been seen to turn negative on stocks short-term, and it remains correct to bet on further gains into mid-to-late April, technically speaking.
Additional charts and thoughts below.
This S&P chart shows the degree of choppiness that's transpired of late, and while prices are unchanged since late March, we've experienced a ton of intra-day volatility, as well as overnight/premarket swings in Futures. The trend from early April though shows higher and higher lows being formed, with a steady level of highs at similar peaks from 2666-2778 since the March 27 peak. Until there is evidence of more meaningful drawdowns, it remains correct to bet on S&P rallying back to test the upside of this range yet again, which happened briefly on Wednesday before the afternoon slide, which happened again yesterday and has been prevalent the last 3 of 4 trading sessions. However, charts still look constructive on an hourly basis while momentum is on the upswing. Until that changes, we'll play for a move back to test and exceed the highs of this range.
Airlines have sold off sufficiently to test a very important area of support for the group and cannot afford to violate 111 in the XAL without causing some additional price damage and further selloffs into late April. Stocks like AAL and LUV look to have already broken down, while others are attempting to hold support after the vicious decline from mid-March. Yet the group has already broken down under a longer-term relative trendline vs the SPX since 2008/9 , making this group one to consider fading strength and avoiding on an intermediate-term basis, Crude's rally not-withstanding. Overall, the next few days will shed some clues as to whether the Airlines can stabilize, or whether the group breaks support and is a drag on the Transports, which have largely been churning just as much as the broader market lately. Stay tuned.
The 2's/10's curve is yet again flirting with hitting new monthly lows, as the curve flattened out once again after the FOMC indicated in its minutes that the pace of rate hikes could be accelerating. While Economic data certainly hasn't been cooperating of late, whiffing vs expectations largely since December 2017, the FOMC has continued to suggest that their inflation risks are NOT tilted to the downside and will proceed with further hikes. This curve very well could turn inverted if the Fed continues to hike another three times, and it's worth watching how this curve plays out in the months ahead.