August 11, 2016
S&P SEPT FUTURES (SPu6)
2168-70, 2157-8, 2139-41, 2125-6 Support
2183-5, 2191-2, 2200-2 Resistance
S&P Futures: (2-3 Days) Neutral- Prices fell under the lows of the last couple days and will need to regain that to bring the near-term bullish view back to the forefront. While getting under 2141 for Sept. S&P futures is necessary to think a larger pullback could get underway, the action in the last couple days where prices have stalled and turned down to multi-day lows could bring about further consolidation, which is important to keep an eye on during the seasonally bearish month of August.
SX5E-Bullish, looking to buy into all weakness, with targets near 3100-3150 into late August- Minor structural improvement on the move above 3000 in the last few days that exceeded 4 month trendline resistance and should allow for further upward progress into end of month. Only bearish on move under 2890.
HSCEI- Stretched, but buy pullbacks at 9180-9250 for a move up above 9500. Index looks to be stalling near-term at April highs, but still a very constructive move in the last week and right to own in small size, looking to buy dips.
Longs/Shorts for a 3-5 day period:
Technical Longs: EBIX, DY, ATVI, DFS, SLB, FFIV, LKQ, NEM
Technical Shorts: PANW, TRIP, COH, STRA, AMT, AAL, FIVE
Minor signs of weakness in US Stocks as the US Dollar and Treasury yields turned down hard in recent days and prices moved down under the prior days lows with regards to both SPX and with NDX. Financials were thought to be a minor culprit for Equity weakness, along with WTI Crude oil, which turned down sharply to multi-day lows which had a negative effect on the Energy sector. Breadth came in around 3/2 negative, while only the Consumer stocks and Telecomm managed to turn out positive performance. For the second day running, Energy was a huge negative weight for SPX as XLE, XOP and OIH all fell more than 1.25% with a nearly 2% drop for OIH. While both Technology and Healthcare have been positives along with Financials in the last week, the sharp pullback in Yield was a definite negative for Financials on Wednesday and if 1.48 for TNX and -0.12 is violated, this would likely result in further downward pressure.
The US Dollar decline will be key to watching carefully in the days ahead for how it affects Emerging markets and commodities. EM has enjoyed a significant 20% rally from early year lows, while Commodities are trying to stabilize given the Dollar's recent turn back lower. Wednesday produced an above-average move to multi-day lows that likely shows further acceleration which could prove beneficial to precious metals, which all came back to life a bit in recent days. Despite the Non-Commercial Net Spec longs in Gold and Silver, technicals still point to higher prices in August in both of these before any meaningful stalling out.
Some charts and additional comments below
Hourly charts on S&P futures cracked lows of the past couple days which need to be recouped right away to give this rally a chance of extending. For now, the 2-3 trend has turned more neutral with this weakness, and would turn negative on a move under 2041 which would lead to further selling into this seasonally bearish month. For now, some consolidation looks possible in the near-term, but the broader trend still looks very choppy since mid-July.
The OPEC Total Crude Production rose to over 33 million barrels in July, something fueled by gains in Saudi Arabia and Iraq while the total number of OPEC members was raised to 14, including Gabon. This weekly chart shows a clean breakout of the longer-term range from 2008 and points to steadily higher supply out of OPEC in the months ahead, which likely will ultimately prove bearish for Crude. While it's difficult to take too much out of Wednesday's decline, the larger pattern for supply looks quite positive.
The US Dollar index decline Wednesday looked to spark the Metals complex, which saw Platinum, Zinc, Palladium along with many of the precious metals show outperformance. Further Dollar weakness looks likely, which combined with yields starting to weaken, should provide further support for Metals outperformance, while dampening the thoughts of rate hikes arriving anytime soon. For now, the US Dollar index decline was one of the few technically significant moves in Wednesday's trading which has seen continued range-bound behavior out of equities.
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