Tuesday mid-day Technical Video
- Minor reversal in US Equities.. but not too meaningful at present- S&P needs to undercut 2874 to care
- Bond yields have moved up to multi-day highs.. but should prove short-lived given sentiment and technically still tough to argue for higher yields
- US Dollar pullback continues
- Crypto breakout helping BTC and many of the Alt-coins to rise 4-6% or greater
- Technology remains strongest sector today. Gains in the last week have helped this sector.. after it slowed in June/July- Upside for XLK limited to near 76. But in the meantime..helpful for stocks
3 more full days left in the month and as it stands this would be our best August in 4 years.
Minor reversal thus far in S&P and DJIA, but nothing too meaningful. S&P needs to get under 2876 which is yesterday’s lows in Futures, and DJIA under 25826 to pay much attention.
Europe closed with a small loss and most of Asia was fractionally higher today. Breadth is about 3/2 negative but Tech and Healthcare leading on the upside, while Discretionary is also positive
Energy and Materials both reversed early gains and while the US Dollar is still weak today.. we have seen Crude pull back, and this directly coincided with Energy weakening a bit- Crude technical targets still remain a bit over 70, between 70-71 over the next 4-6 days.. so its likely losses prove short-lived
Overall given the extent of the rally over the last few days.. it’s likely that further gains are difficult to come by heading into one of the more seasonally difficult months of the year.
Prices have gotten well overbought and many of the divergences between US and Europe remain while seasonality will continue to be negative through September, with Average mid-term election year losses of -1% for DJIA and -0.4% for S&P going back since 1950. The DJIA has still not joined the DJ Transports back at new highs, so there is some additional divergence there also which hasn’t been alleviated by the recent push of many indices back to new highs. VIX also has firmed of late.. and some positive divergence with VIX vs Equity markets.. as VIX remains up over 13% off early August lows and set to close at new 5-day high close today. For now, the trend remains bullish, but up against the UPPER channel of resistance since April and stretched, with RSI readings near 70 on Daily charts , the most overbought since January. Meanwhile, evidence of counter-trend exhaustion is now forming on Daily charts of many US Equity indices as well as style sectors.
Upside should prove limited in the days ahead.. but still can’t rule out a move to 2914-8 area for S&P and VIX down to 10.50-11, but this should be an excellent oppty to buy implied volatlity for the month of September------S&P CHART below- see prices up near the upper end of this resistance range
VIX- See the extent of the divergence with prices well over August lows- this needs to be watched when VIX diverges.. as the same thing happened in mid-Jan right before the market peak
Technology’s minor breakout coinciding with NASDAQ moving back to new highs has helped Tech regain some of its recent underperformance..
While upside for XLK looks limited- ie 75.50-75.75- We’ll need to see Tech start to weaken before having much conviction that stocks move lower.
I do expect this to happen in September. For now. This group is still outperforming