March 24, 2016
S&P JUNE FUTURES (SPh6)
2004-5, 1956-60, 1927-30, 1916-8 Support
2029-30, 2032-3, 2048-50, 2075-7 Resistance
1. S&P has broken its uptrend from mid-February as of early Thursday morning in the US which should lead to additional weakness over the next 3-5 trading days and likely retrace 38-50% of the recent five-week rally before a move back to new highs occurs. While a close under the 10-day ma (currently 2023) would be more meaningful than just intra-day weakness, the momentum warning signs over the last couple days as a result of the flattening in S&P have now given way to violations of trends which turn the near-term trend negative, and suggest selling into minor bounces Thursday for further selling pressure.
2. Crude oil has served to lead equities, as has been the case over the last couple months, and the waning momentum in Crude over the last week has now given way to a break below $39 in WTI, and S&P has promptly followed suit. In the short run, given the combination of bearish inventory data combined with waning technical momentum in WTI Crude, (and now the trend break), it looks likely that additional pullbacks in Crude can happen.
3. The US Dollar index looks to be getting close to a near-term peak after five straight days of gains, while both Gold and EUR/USD have trended lower in the last week, which also need to be watched carefully for some evidence of stabilizing here and turning back higher. Given the ongoing Downtrend in the US Dollar index, this recent bounce is seen as counter-trend only, and could stall out in the upcoming days. Therefore, precious metals stocks should be given a strong look to buy on signs of stabilization into next week along with Materials stocks in general, many which have faded on recent Dollar strength.
5. Europe and China have shown some evidence of turning down, but yet both STOXX 50 and HSCEI remain near trendline support and have not yet violated trends such as the US has.
BOTTOM LINE- The churning in US Equities and waning momentum have indeed begun to lead lower in the last 24 hours, as Equities yet again have begun to follow Crude. Given that the breadth overall remains quite strong and pessimism has not waned all that substantially, technically it seems unlikely that S&P gives back more than 50% of the rally from mid-February before turning back higher. However, at present, the trend looks to have turned down, and closes at current levels by end of Thursday would give some conviction on this front and lead lower into next week. Historically, the time ahead of Easter holiday season in the US Tends to be strongly positive, so a down day would go against seasonal trends. However, price action must be respected, and momentum on hourly charts has turned down to oversold levels for the first time in a few weeks, along with Russell 2000 starting to show more serious signs of underperformance in the last couple days. For now, minor bounces on Thursday should be used to lighten up for the potential for weakness down to 1956-60 area or even 1927-8 in S&P June Futures.
WTI Crude slipping down under $39 and on the verge of breaking this trend from mid-February. Momentum had given some warning signs on the recent move up above $41 and now have slipped given bearish inventory data and price starting to give way.
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