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Minor Stalling out for April expiration ahead of Doha meeting

April 15, 2016


2058-60, 2045-7, 2020-2021, 2004-5Support
2090-1, 2102-4, 2123-5, 2135          Resistance


S&P Futures: Bullish but extended, raising stops to 2061- ST target 2090-2
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- Rally to test March highs near 3116 and above looks likely for EuroSTOXX, which could drive prices eventually up to 3300
HSCEI- Hang Seng China Enterprise index- Extended but near 9400 initial target- now pullbacks buyable
WTI CRUDE: Bulllish- Stalling out a bit near-term,but pullbacks should prove limited, and overall Bullish- Reclaiming Tuesday's highs allows for45
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

Bullish, but extended- Buy Pullbacks-  MBT, AEM, NEM, FCX, GDX, GG, TRXC, EBF, DG, CHD, OC, PM, MCD, AVGO, SONC, POOL

Attractive Technical Risk/reward Shorts: T (36.75 tgt), RT, LC, SQ, DF, TSN (low 60s) ADS, KO (44.5 Tgt) GPS, BBBY, FL, MNK, NOV, P, RL, CROX, CF, FOSL, JWN, HOG, HTZ

Bottom line, Upside might look to prove limited given the numerous former highs that indices are approaching from last November and last May's All-time high peaks, less than 2% above, but the degree to which sectors are now showing evidence of breaking out could help indices push back to new high territory before any meaningful selloff gets underway.  Thursday proved to be the least volatile day this year, with a very tight 0.46% range for SPX which leaves the near-term view unchanged.  While upside resistance remains formidable, near 2090-5, there hasn't been sufficient grounds to sell stocks and expect any sort of meaningful pullback.  Most breadth, sector rotation, seasonality, and lack of bullish sentiment still argues for additional upside, despite the minor waning in breadth seen in recent days.

Transportation, energy and further upside follow-through by the Financial sector is all thought to be positive news for Equities at a time when Defensive stocks have begun to fall by the wayside.  As mentioned yesterday, the fact that breadth and momentum have waned a bit in the last few weeks is a minor issue for US Equities given that major resistance looks to be directly overhead.  However, the degree of sector rotation into "Risk-On" sectors like Financials, Energy, Discretionary and Industrials is indeed positive, while defensive sectors like Consumer Staples and Utilities have begun to lag.  Additionally, given that the Advance/Decline (Cumulative) moved back to new high territory is a major positive for thinking that stocks likely move back to new highs.

While many have grown bearish on the chance for US index Upside follow-through fundamentally or for macro reasons given the extent of the move thus far, and some technicians have joined the chorus given that prices are up against tough levels, this reasoning could stem psychologically from the fact that many were much more defensive on the way up, and have yet again attempted to find an area to "pick spots" to sell. While Put/call data has indeed started to drop off in recent days, we still haven't reached overly enthusiastic levels that would suggest market peaks are at hand.

Sector-wise, we've seen energy Financials and Materials all breakout above key resistance in recent days, while Technology, Industrials, Healthcare, and Discretionary all lie"waiting in the wings" below prominent former highs which are important.  The ability of these sectors to push through would go a long ways towards cancelling out a lot of the doubt which is created by momentum failing to keep up with price of late.  For now, given the seasonally bullish stats surrounding April expiration, it pays to still stay long and look go buy any dips that the market gives us.  Stops on longs for S&P futures are raised to 2061.

S&P futures are certainly stretched at current levels, but one could have made the same argument a couple days ago down near 2040.  The move back to new 2016 highs showed a few signs of stalling out, yet failed to bring about any degree of reversal, and Financials continue to lead the charge after the relative breakout (shown here yesterday)  Movement up to 2090-5 would be a better area to consider lightening up for trading purposes, and for now, stops are raised to 2061.

While many are overly focused on the S&P and DJIA, the NY Composite has quietly been escalating after having made its own breakout which happened earlier in March.  Given the broad-based nature of this index, this move is given a bit more credence than when looking purely at the SPX for signs of stalling out after recent gains.

Transports continue to show above-average strength, outperforming on Airline strength Thursday as most of the NASDAQ fell to slightly "down" on the day.  The technicals of the daily DJ Transports chart have begun to improve, and it wouldn't take much before Transports begin a much larger rally, which would simply require an advance back over March highs structurally speaking.  Overall, after numerous concerns about underperformance, we're finally starting to see Transports make an impressive comeback, which is another reason to be optimistic in the near-term.

The "All Stocks" Advance/Decline managed to push even higher as of Wednesday's close, and while not having moved up to new all-time highs just yet, which did happen in the Cumulative A/D, this pattern remains positive given the snapback and recent breakout above the downtrend from last Summer.


Options Expiration data for April tends to show a very positive seasonal bias for this time in mid-April.  Since the early 80s bull market began in 1982, the S&P and DJIA have both advanced 23 times in 34 years on expiration day, with an average gain of approximately 0.20%.  This is another positive for the near-term that suggests an imminent selloff likely is postponed a bit longer.


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