April 13, 2016
S&P JUNE FUTURES (SPm6)
2045-7, 2020-2021, 2004-5, 1975-6- Support
2063-5, 2071-2, 2090, 2102-4 Resistance
S&P Futures: Bullish, raising stops to 2030- ST target 2071-2, Under =2000, 1975
SPY: Bullish- Upside resistance 207, then 211-212; Support 203, Under leads to 200
US 10-Year Yields: Bullish- 1.86 important; Over leads to 2.00%- Under 1.70% Negative
German Bund Yields- Bullish-Gains above 14p should lead to 24-25bp
Euro STOXX 50- Bearish- Sell rallies at 2970-85, with stops over 2985-Target 2750, 2675
HSCEI- Hang Seng China Enterprise index- Bounce should find resistance 8900-8950- Until 8950 exceeded on close, trend remains negative-Target 8350, 8260- Above 8950 allows for 9400
WTI CRUDE: Bullish- Close at new 2016 highs could drive higher to mid-40s before any peak ahead of this weekend's Doha Meeting
USDJPY: Counter-trend bounce could occur given today's rebound from oversold conditions, with initial targets near 111- Important to exceed this to have confidence of Yen Drop- -First Target 107.70 reached, eventual target 102
Attractive Technical Risk/reward Longs
VALE, VNTV, MRO, WMB, HES, APA, NAVI, SWN, LGND, MDT, KMB, SBUX, SAFM, BCR, BSX, DVN, ELLI, MSFT, NKE
Bullish, but extended- Buy Pullbacks- MBT, AEM, NEM, FCX, GDX, GG, TRXC, EBF, DG, CHD, OC, PM, MCD, KO, AVGO, SONC, POOL
Attractive Technical Risk/reward Shorts: ADS, GPS, BBBY, AKAM, FL, MNK, NOV, AGN, P, RL, CROX, CF, FOSL, JWN, HOG, HTZ
Just when the market had shown a few signs of trying to pullback yet again, prices held support and ripped right back up toward the highs. WTI Crude was thought to be the key driver, in terms of a reason for "why" stocks might have moved up, but German Bund yield stabilization also can't be overlooked, and signs of yields rising back over 16 bps is not insignificant, given that they were just under 10 bps a week ago.
Overall, stocks are now back to levels which mark the highs of the range from early last week but have managed to exceed a minor downtrend as shown on hourly charts below. This act of holding near the highs is definitely more bullish than bearish, as there was evidence just last week that stocks might be turning down, with the presence of "Head and Shoulders type formations on hourly charts. These were certainly valid, but prices never managed to follow-through to the downside, and yet again, this pattern over the last week is increasingly looking more bullish, as a form of consolidation before stocks move higher yet again. Key to note in this regard is not only the stabilization in Energy, but also in the Financial sector ahead of this week's earnings. While the group has a long ways to go to thinking its positive in any shape or form, rallies in the broader market where this group outperforms definitely tend to be taken a bit more seriously.
The Energy move definitely looks positive near-term ahead of this weekend's Doha meeting with WTI Crude's close at the highest levels of 2016. Given that WTI and SPX have correlated more closely than how SPX moves with TNX, or USDJPY in the last couple months, it's important to note that Crude has made such an important move ahead of this weekend's meeting. WTI managed to exceed its 200-day ma, which had served to thwart advances the last three times over the last year. Bottom line, additional gains into this weekend's meeting look likely given that the Output Freeze talk coincided with this move, and any reversal of that decision won't come until Sunday at the earliest. So it's right to follow the move in Crude up to the mid-40s as well as participate in the move in XOI, XLE, OIH and XOP on any pullbacks it might offer.
Overall, Monday's pullback looked to have held where it needed to, and now has helped SPX, NDX, DJIA rebound in resilient fashion, led by Energy and Financials, in an environment where most expected equities to pullback, and were particularly downbeat heading into Earnings season. If anything, the rebound back to new highs in Crude, along with a substantial bounce in German Bund yields likely keeps the selling at bay for awhile. A keen eye will be kept on recent lows of 2020 for S&P futures and stops should be moved up on longs to 2030, with 2044-5 also having importance.
S&P futures have exceeded a mild trendline extending from last week's highs. Price has gotten extended on hourly charts, but looks to be a far healthier situation than what was seen last week, given the amount of sideways trading, which has helped to alleviate some of the overbought conditions initially present on daily charts. While pullbacks could happen on a 1-2 day basis, they should be used to buy, given the structural progress.
S&P futures had a very different look this time last week, threatening reversal patterns on hourly charts, which resembled a Head and Shoulders formation. This of course failed to show much technical damage, and now this week have managed to churn in a consolidation type range vs pulling back.
Don’t look now, but one of the assets that has correlated most closely with SPX in recent months has just made a new closing high for the year. We’re talking of course about Crude oil, which has been under increasing scrutiny ahead of this weekend’s OPEC meeting in Doha. Today’s surge on reports of a possible Output freeze between top producers Russiaand Saudi Arabia helped prices in both Brent and WTI Crude close above their 200-day moving averages for the first time since October 2014 (WTI) Technically given the fact that the 200-day has repelled the three prior rally attempts, the act of regaining this looks to be a positive. Structurally, it's also bullish that prices have closed at a higher level than seen at the last swing high, in mid-March. Overall, a rise up to the mid-$40s near $45 looks possible before any trend reversal.
German Bund yields rallied in spectacular fashion today, up to over 16 bps, which should drive yields higher up to near 24-25 bps in the near-term. While there was only mild stabilization heading into Tuesday's trading, this development looks far more bullish than what was present yesterday on yield charts.
Silver has started to play "Catchup" with Gold of late, with its move back to new weekly highs, and appears to be gradually bottoming out. SLV, the Ishares Silver Trust ETF has cleared highs seen in both February and March and has surpassed a long-term trendline from back in 2014. Overall, this progress should allow for a move up to over $17 given the recent surge in momentum
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