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NDX, SX5E outpeform SPX as Helathcare, Technology show sigsn of bottoming

May 10, 2016


2030-2,  2026-8, 2007-9                   Support
2064-5, 2084-6,  2097, 2105-6       Resistance





S&P Futures: Short SPM6- Stop 2067)  Target 2026, with outside chance of 2007 but skeptical that 2000 is broken, and various cycles indicate an above-average chance to buy dips should be right around the corner.  For now, the near-term trend remains bearish, and additional weakness looks likely.

EuroSTOXX 50-  Bullish, with stops at 2880-Target 3100- EuroSTOXX looks to have made a short-term bottom with last Friday's close & Monday's upside follow-through

Hang Seng China Enterprise index- Bearish, but extended, look to Short at 8600-8700 with targets at 8000

Attractive Technical Risk/reward Longs

Bullish, but extended- Buy Pullbacks-  NOC, LLL, JEC, BGS, NSP, LMT, VMC, AMSC, FIS, MBT, AEM,TRXC, EBF, DG, CHD, OC, PM, MCD, SONC, POOL

Attractive Technical Risk/reward Shorts: FXI, AAP, VSLR, BBBY, PTEN, GT, GPS, HTZ, CF, SPLS, SHLD, AWI, CIEN, SQ, ADS,MNK, RL, FOSL, HOG

Bearish but extended- Sell Rallies- DDD, CROX, EFOI, TSLA, LC, KONA, CSIQ, FSLR, FIT,MYL

Equities have attempted a minor lift off recent lows as of Monday, but most of the progress was seen both in the NASDAQ 100, Composite and in Europe vs the SPX, which remained very much flat in Monday's trading.   The weight of the near-term technicals still hasn't improved sufficiently to think lows are at hand, despite a 30 point lift in S&P off the lows.   As mentioned late last week, there were several factors which argued that lows could be near, mostly which had to do with cycles and Technology, Healthcare reaching support.   Treasuries rallied along with German Bunds in Monday's session, something that might cast some doubt as to equities rallying sharply, while China's Shanghai Composite broke down in trading,which largely went unnoticed by much of the western world.  The Dollar's gains extended for a firth day, though are right at important resistance and still difficult to expect that a larger rally should get underway just yet without some type of backing and filling to this move.  Commodities slid as a result, with Iron Ore, Gold, Silver and WTI Crude backing off just to name a few.  While Energy and Materials were weak in trading Monday, it's still difficult to treat these sectors as bearish technically, and if anything the pullback should provide buying opportunities in both.

Overall, the positive effect of the NASDAQ's move does look important, along with Europe, while Healthcare and Technology seem to be bottoming near a key area which also has significance.  Additional upside looks to be necessary for SPX to have confidence at this point that rallies back to highs are upon us.  For now, given the bearish charts in Bund Yields and TNX, along with heavy weighted sectors like Financials not really showing much strength, it looks a bit premature to swing for the fences, and selectivity remains key.  Momentum on SPX charts remains negatively sloped, and a bit more weakness still looks more likely than a continued bounce from current levels, particularly if the US Dollar stalls out and turns back lower.   Drawdowns in SPX to 2007-9 for Futures, 2011-2 for SPX Cash would be a much stronger level to advocate cutting shorts and assuming longs for rallies back to highs.

Charts and comments below.

Despite a bounce from S&P,  momentum remains slanted down, and it still looks likely that a retest should happen of last Friday's lows which could undercut briefly, before a low of any magnitude is in place.  Stops remain at 2067 for shorts while targets lie below at 2026-7 with 2007-8 being ideal for S&P futures.


Nasdaq Composite looks to be trying to bottom out vs SPX after a steep selloff from mid-April, and Monday's trading showed some evidence of NASDAQ 100 and Composite index making new multi-day highs which could prove to be important in the weeks ahead.  For now, it's worth taking off NASDAQ shorts and expecting outperformance vs SPX as Technology attempts to bottom out after its recent extreme lagging.  Despite an overall short-term bearish stance on SPX, technically this should prove minimal in nature, and any signs of a larger healthcare rally or bounce in AAPL likely would help this rebound even further.

US Dollar index has enjoyed a sharp rally in the last week, yet most seem to have caught onto this quickly and are now calling for the death in commodities.  Despite Monday's sharp selloff in precious metals and energy reversal back to the downside, the commodity move doesn't show compelling evidence of peaking out too meaningfully just yet, and another stab at highs looks likely before this rolls over in June.  The US Dollar index, on the other hand, is likely to peak out in the next few days and revisit lows before any type of a larger rally is at hand.   Counter-trend buy signals are premature, and prices lie up against strong downtrend resistance lines which should make further upside difficult.  This in turn, (a USD pullback) could help EEM to stabilize and bounce after a poor showing in the last week.


China's Shanghai Composite sold off to the lowest levels since early March on Monday, something which in the past has been important for US Equities, as both the SPX and the Shanghai Comp double bottomed in January and February while making near-term peaks in April.  For now, the trend is bearish in China with this break under 2900 and FXI also looks like a near-term laggard vs many indices, such as the XLI, which was highlighted in this weekend's Weekly Technical Perspective.



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