April 10, 2018
S&P JUNE FUTURES (SPm8)
2605-6, 2584-7, 2552-4, 2532-4 Support
2660-2, 2677-9, 2683-5 Resistance
LINK TO TECHNICAL WEBINAR from Thursday 4/5- https://stme.in/tBobOtxUYL
SPX - (2-3 Days)- Bullish- Monday's sharp reversal into the close failed to take prices negative, so technically it still looks right to have a positive stance and risk down to 2600 for a move up to 2672 initially, with over leading to 2750-60.
SX5E- EuroSTOXX 50- Stallout possible at resistance- Up near important near-term levels 3400 to 3450. Upside could be contained until prices successfully can exceed the highs of this recent range- Bearish SX5E vs SPX and expect European weakness relatively speaking.
HSCEI- Bullish- US Dollar downturn could serve to help prices stabilize now that HSCEI has reached February lows. Long here with upside near 12800 initially and over that near 13114.
Trading Longs: DBC, FXB, FXE, NDAQ, RHT, PM, SQ, TWTR, AKAM, FSLR, BZUN, GOOS, FIS, TJX, STZ, SHAK
Trading Shorts: UUP, EUO, SIG, CRK, SLB, PCAR, FL, BBBY
Long SPY 261 with initial targets 267-8, with over leading to 275. Stops under 258.
Long DBC for commodity exposure- $16.94 with targets $17.85
Long GBPUSD (1.4123) for move to 1.4370, 1.50, and Long EURUSD 1.2324 for a rally up to 1.265
Long XRT 43.50-44.50 for a move in the weeks ahead up to 47
Long XME 33.50 to 34.50 for a move to 37
Long XLV 81.50 or better with targets near 85
Long XLP 52.83 up to 54.50
Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Monday's late selloff isn't sufficient to expect S&P to move down to test recent lows, and if anything, it's still right to favor a rally higher in the days ahead. Volume and breadth turned negative late in the session, but prices still eked out gains, and the act of having stabilized and moving higher Monday could help indices continue on that path into mid-to-late April. However, given this new age of volatility, it's right to utilize stops near 2605, as hourly closes under that level would in fact postpone the rally and suggest a likely retest and potential break of 2584 and February lows. At present, all of the positive factors mentioned in the weekly report as to why equities could stabilize and turn higher certainly were not erased by a bit of late day selling. Both Technology and Financials were up nearly 2% at mid-day, and both sectors seem to have sold off sufficiently from mid-March which took prices down to meaningful trendline support. Thus, it's easy to make the case for buying in small amounts here from a risk/reward perspective, with tight stops as upcoming stabilization and rallies seem more likely technically than a continued selloff (at least over the next few weeks)
Outside of equities, we saw a sharp reversal in the US Dollar Monday against many developed and emerging market currencies while commodities staged a moderate comeback. Heading into Tuesday, it looks right to favor Pound Sterling and Euro to continue on Monday's path and rally, while the Dollar index very well could weaken in the days/weeks ahead as DXY looks to be in a seasonal period of weakness while Technically has begun to turn lower yet again after just a brief shakeout late last week. Grains rallied sharply while WTI Crude bounced off meaningful trendline support and Gold also managed to push back higher above 1340. Long positions in commodities in the days ahead look to be a higher conviction trade than long equities, but at present, we'll attempt to stay long both.
Additional charts and thoughts below.
Despite the late day selloff, equities maintained their earlier consolidation and still look likely to break out of this recent range to the upside over the next week, as S&P reaches highs near 2672 and exceeds that on its way to 2750-60. Breadth finished negative in trading on Monday and the late weakness likely shook out many bulls who had attempted to buy during Monday's session. Overall, from a risk/reward perspective, Monday's close looks ideal to buy dips with upside targets initially around 60 points higher, while putting stops near 2600, as under that level should lead to a test and possible break of 2584. At present, there's insufficient technical proof to think any sort of decline is underway, based on Monday's late selling ,and a bullish stance with tight stops still looks to be correct.
USD weakness could continue- BLOOMBERG DOLLAR INDEX- BBDXY- The original thoughts we shared about the Dollar turning back lower were tested late last week, but as of Monday look to be coming to fruition. GBPUSD broke out to multi-day highs, while EURUSD also staged a decent about-face after threatening a breakdown last week. We've also begun to see USDJPY pulling back a bit after breaking out of a downtrend from mid-January highs. Overall, the move higher in Pound and Euro should continue in the days/weeks ahead, and right to bet on higher prices, while the DXY could fall back down to new multi-week lows, violating a 10-week consolidation trend in the process. Movement back under 1116 in the Bloomberg Dollar index would suggest a likely sharp decline to near 1100, and fits in with seasonal trends for the Dollar in the month of April.
Commodities bullish- The minor triangle pattern begun in the Powershares DB Commodity index tracking fund looks to have been exceeded as of Monday's close, and bodes well for further commodity strength in the days/weeks ahead. Grains, energy and metals all participated Monday, and being long commodities through the DBC etf makes sense with 16.94 entry and targets up near 17.85. In the weeks ahead, further Dollar weakness and commodity strength looks likely.