June 10, 2016
S&P JUNE FUTURES (SPm6)
2107-9, 2101, 2082-3, 2075-7, 2065 Support
2120-1, 2125-6, 2135-6 Resistance
S&P Futures: Bullish- Minor pullback attempt Thursday proved miniscule before ripping back to close nearly unchanged on the day. Still very little evidence of any type of peak in place on charts, and with 6 hours left in the week, SPX is set to close at the highest levels since last July. Movement down under 2105-6 is necessary to expect additional pullbacks and for now, minor drawdowns are a buying opportunity. 2120 is key on the upside and getting over this level will fuel further gains and allow SPX cash to test all-time highs from last May into mid-June.
EuroSTOXX 50- Pattern in EuroSTOXX looks increasingly more negative in the short run and far more bearish than what's seen in the US. For now though, prices remain locked in range-bound action since March and have trended down in June thus far while US prices have moved higher. 3094 is important for upside while 2883-5 defines downside support.
Hang Seng China Enterprise index- Bullish , and gains of late have exceeded minor trendline resistance from last October, with 9174 important on the upside and then 9300 near April highs. Emerging markets and China both are bouncing given the weak US Dollar
Equities- Attractive Technical Risk/reward Longs
WAT, MDT, EA, WBMD, HAS, AYI, MXL, THO, CRL, SWHC, INTU, WOOF, CRM, MKTX, DY, CETA, LAMR, ORIG, AMZA, FET, TMO, RTN, KAR, CB, HEI, IT, FIVE, CRL, GPN, DG, TXRH, UNH, GD, MLM, VSAT, AVGO, CVS, NOC, CL,TSN, NXPI, TXN, CVC, WB, LGND, SBUX, SAFM, BCR, BSX, CCRN, FRPT, DVA, AMZN
Bullish, but extended- Buy Pullbacks- AET (117), HSIC (176-7) IGT- 18.50) BSFT, TAP, TWC, AVY, MO, CB, FISV, NOC, LLL, JEC, BGS, NSP, LMT, VMC, AMSC, FIS, MBT, AEM,TRXC, EBF, CHD, OC, PM, MCD, SONC, POOL
Attractive Technical Risk/reward Shorts: DV, CONN, KMX, SHLD, HZO, GME, KONA, HOG, GES, ZUMZ, SIG, RT, TIF, RL, LC, WDAY, BBBY, XRT, ANF, MOH,FL, SPLS,TAN, FOSL, AAP, VSLR, PTEN, GT, GPS, HTZ, CF, SHLD, AWI, CIEN, SQ, CROX, EFOI, CSIQ, FSLR, FIT
Key developments for Thursday revolved around the breakdown in Treasury yields, not just in the US, but globally, which saw sovereign yields plummet, in some cases to new all-time lows. Although we touched on this briefly yesterday, this was a key technical development that helped to drive outperformance in Utilities, which arguably are breaking out now in relative terms, while causing technical damage in many of the Financial names. Many of the Utilities stocks were talked about in the prior Weekly Technical perspective, but stocks like NI, PCG, PNW, WEC have all been steady outperformers this week, with one day to go, as the absolute breakout in XLU is now resulting in this group showing more serious signs of outperformance.
Financials, meanwhile moved down to new relative weekly lows, and continue to show lagging tendencies. While the XLF chart in of itself isn't technically damaged, the pullback has been ongoing for the last few days, and still seems to have some additional downside before any real support comes into play. Laggard stocks which look particularly vulnerable on a technical basis in the days ahead are: BEN, PRU, GS, LM, and KEY. Some of the larger names really haven't budged, or broken down, and these likely won't show too much more weakness, and/or have quickly moved down to key areas of support: C, WFC, BAC, ETFC, and SCHW all fit this description.
Overall for S&P, the stalling out in NASDAQ really hasn't been that much of a detriment to SPX gains, which are on track to finish at the highest level on a weekly closing basis since last July. While many are eager to try to sell indices up near former highs, thinking a larger pullback might be upon us, we've seen scant signs of any technical weakness that would make paying attention to the macro or earnings worthwhile. Just in the last week we've heard stories of Carl Icahn, George Soros, and Stan Druckenmiller all weigh in negative on the market, at a time when prices are pushing up to near all-time highs. While its noble to think one can "catch" the top without using technical tools, and using poor Macro data as a reason to Join the crowd and think that price must "FOLLOW" the uncertainty, often the opposite proves to be true, and selling into strong markets can prove premature. In this case, the S&P has not even experienced a close down UNDER the prior day's lows since May 13th, nearly four weeks ago. If this isn't a resounding testament to the resilience of US Equities during times of turmoil, I don't know what is. Bottom line, until there is ample evidence of some type of peak in price, and/or a move to multi-day lows that would warn of additional selling, it should pay to stay the course, technically.
Charts and additional comments below
Simply stated, with six more hours to go of trading for the week, SPX cash index now stands to close at the highest levels since last July. Given the lack of confluence of counter-trend sells per Demark, or sufficient negative divergence, or overbought signals, it's difficult to use a move to new monthly highs on a weekly close as an excuse to sell. A further push higher into mid-June and ultimately into early July to all-time high territory is anticipated.
Ten-year bond yields, along with 30-year, have cracked down under former lows, and look likely to finish out the week at the lowest levels since February. Given that US yields remain largely higher than most developed countries, and Germany and the UK have both seen their yields press lower and breakdown out of existing trends, the same seems to be happening for US Treasury yields. It's wise to pay attention for the possibility of a false move given that counter-trend buy signals using TD Sequential and TD Combo will form exhaustion signals heading into next week, but we'd need a meaningful snapback to think rates can avoid a test of 1.60. For now, movement back over 1.71 to end the week would be meaningful, though perhaps unlikely.
Utilities have been the big beneficiary of yields plummeting to new monthly lows and the relative chart of XLU vs SPX has just arguably exceeded this entire downtrend since February in relative terms. This should allow for additional near-term outperformance for this group and the Utes should be favored for further relative strength in the days and weeks ahead.
Financials, on the other hand, have been a source of real weakness of late, with charts of XLF to SPX breaking down to the lowest levels since early Spring, severing uptrend lines and now violating May lows relative to the SPX. While the XLF should find firm support near .$23-$23.25, other regional banking stocks could face more severe weakness in the days ahead. Until yields can stabilize, Financials are a group to be avoided where weakness should not be used to buy right away.
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