February 3, 2017
S&P MARCH FUTURES (SPh7)
2262-3, 2254-6, 2260-2, 2246-8 Support
2281-3, 2289-90, 2298-2300 Resistance
S&P Futures: (2-3 Days) Mildly Bullish- 4 straight days with prices well up above intra-day lows still favors this consolidation being resolved by a move higher. UNDER 2262 on a close merits caution.
SX5E- EuroSTOXX 50- Bearish- Pullback to multi-day lows is not a positive, and could result in short-term weakness for SX5E. However, prices aren't likely to fall under 3150, 100 points lower which should be support and help SX5E stabilize and attempt to move back higher. For now, this is a ST bearish development.
HSCEI- Neutral, turning to bearish on a move under 9671. Above 9881 is short-term bullish. For now, no evidence of any real downturn, just a stalling out, so will continue to respect this recent move.
Longs/Shorts for a 3-5 day period:
Technical Longs: KIE, AMGN, DXJ, BAC, ENDP, ABT, TECK, KMT, URI, MTB
Technical Shorts: SIG, WMT, TAP, MNST, HRL, XRT, PRGO, KSS, BBBY
Very minimal net change by Thursday's close as the markets trudge into February, a notoriously difficult month seasonally for Equities in post-election years. S&P yet again attempted to move lower, yet by end of day, had regained all its losses to close at a fractional gain. In fact, the last four sessions have seen the S&P futures contract close UP 11, 6, 12, and 13 points respectively from intra-day lows, which is roughly 1/2 Half Percent, on average. Meaningful rebounds daily, while testing support from early January and failing to break. No change in outlook based on yesterday's resilience, which if anything, adds conviction that this 2262-4 area is quite important for S&P futures. As in previous days, it's right to be long vs this level as a stop on a closing basis, thinking that prices push higher.
Key developments concerned three key technical moves: First, the US Dollar fell to the lowest levels since last November when eyeing the DXY, the US Dollar index. Dollar/Yen fell to Tuesday's lows, but is set to finish at the lowest weekly closing level since November and looks vulnerable. Precious metals, meanwhile, rocketed higher, as Gold initially broke out above prior 1223 highs before settling, but is still set to close at the highest weekly close with one day remaining since mid-November as well. Additional gains look likely for both Gold and Yen (USDJPY goes lower) in the short run as the Dollar stabilization and rally still looks a bit premature.
Second, Defensive sectors have begun to lift, with Utilities and Consumer Staples attempting bounces over the last couple days, with Real estate also lifting. Some of this has to do with defensive positioning while the other strength looks purely interest rate related. For now, this rally in these groups should prove short-lived for the time being, and technically looks good to sell into as the global bond selloff doesn't look anywhere near complete in the short run.
Third, Financials have not really shown much weakness, which is important to note, given that Treasury yield rallies look to have stalled a bit in the near-term. XLF has been literally unchanged since early December, but on weekly charts, continues to resemble a "flag" formation, which could lift higher up to $25 or so before any real drawdown. So the 1% declines seen Thursday in KRE, KBE, and XLF really haven't done much, if any real damage. For now, the combination of a resilient tape, decent leadership and good breadth overall (Advance/decline near highs) should outweigh the near-term seasonality concerns coupled with a bit of stalling in short-term breadth.
Additional thoughts and charts found below
This daily chart shows how many consecutive days S&P has now rallied substantially off its lows. While momentum is starting to wane given the initial failed rally into late January, from a price perspective, this pattern remains constructive and should allow prices to move higher to test former highs before any meaningful pullback gets underway. Pullbacks under 2262 in Futures (2267-SPX cash) would change this thinking and allow for a minor drawdown to get underway for February.
Gold's breakout attempt failed to close above where it needed to on a daily close Thursday, but remains well positioned to make further progress and will still (at current levels) finish at the highest weekly closing level since November. Additional upside progress to 1240-55 looks possible before gold turns back lower.
Amazon's post close drop down to 802 post close represented more than a $30 dollar drop from closing levels, or roughly 4%, as revenues missed expectations despite turning out more than 43 billion in Revenue for 4Q. The near-term pullback should be buyable between 790-805 given the presence of former highs from November along with meaningful retracements of the prior rally which should serve to cushion declines. AMZN's drop fails to change the technical structure too dramatically and it remains well positioned for a move up to $850 and then $885 which would be a 100% extension of its rally from 2015. Heading into Friday, it's difficult not to see AMZN find support and turn higher technically given the sudden drop within the ongoing bullish structure.
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