April 27, 2018
S&P JUNE FUTURES (SPm8)
2650-2, 2636-7, 2620-1 Support
2675-7, 2688, 2718-20, 2724-6 Resistance
LINK TO TECHNICAL WEBINAR from last Thursday, 4/18/18- -https://stme.in/yadt92dtNf
SPX - (1-2 Days)- Bearish with a very short leash at 2677 for stops- Prices rose right to near key resistance in both price and time, as indices have now seen 90 days pass since the late January highs and have risen to key trendline resistance from April 18th highs seven days ago. The area at 2675-7 is important and one can sell Futures against this level. Above stopping out shorts and postponing the decline until 5/1
SX5E- EuroSTOXX 50- Bearish- Prices look likely to reverse course after having regained 61.8% of the prior downturn from late January. 3524 is important and over allows for gains to 3586. Below 3450 suggests a pullback to 3424 which has importance.
HSCEI- No change- Choppy and Neutral short-term. following consolidation near lows for the last month- . HSCEI requires a move back over 12450 to have a shot at a larger rally, which for now is subdued with prices locked in range-bound consolidation. Downside under 11850 would bring about a selloff.
Trading Longs: ALL, EMN, NDAQ, M, TWLO, ABT, MOMO, CAR
Trading Shorts: AAL, UAL, JBLU, LUV, TRIP, MCHP, SWKS, WDC, STX, , NTAP, IBM, FDC, BEN, XRAY, DRQ, CMI, HSY, HOG, BBBY
Short SPY from 265, with targets down at 256.
Long TLT from 117.50-118.25, with TBT having reached targets, expecting 10-Year Treasury yields to fall after the rise to 3%
Long DBC for commodity exposure- targeting $17.85
Short IYT 187.62 with targets at 181.50
Short SMH with target 93.88-94.25
GBPUSD_ Buy 1.3895 down to 1.38 for move back to 1.45
Amazon blows out earnings and is materially higher, yet Stock Futures are down Thursdayevening. Sounds like par for the course for equity markets this year. We've seen many FANG stocks and large cap Techs dominate performance, which represent outsized chunks of many ETFs (Home Depot, Amazon, Netflix within Consumer Discretionary), yet the equal-weight version of these indices have faltered since late last year and/or have underperformed as the few large names have made up the bulk of gains.
Thursday's rally carried prices to near make-or-break levels, and while getting over 2660 was important and a minor positive for the structure, prices have yet to break out above 2675, and now prices are nearing a key time zone for trend change, when this rally likely ends and reverts to the ongoing pattern in play, which in this case.. is lower. We're faced with near-term overbought conditions on hourly charts, while weekly momentum is lower and structurally, indices have not made sufficient progress to argue for a move back to highs. Breadth and volume have proven lackluster and we've seen material weakness and reversals out of Semis and Transports recently, along with many Industrial stocks, as Airlines followed suit on recent breakdowns and pulled back on Thursday. Interest rates also look close to stalling out in the US, while many European bonds could fall to catch up with US. The Dollar meanwhile has rallied sharply in the last 2 weeks, yet is nearing its own area of resistance based on the longer-term downtrend from December 2016, while counter-trend signals of exhaustion lie roughly 2-3 days away. This should set up with chances to buy GBPUSD and EURUSD again, along with many commodities which have weakened of late, but remain technically sound on an intermediate-term basis.
Overall, the next few days will be key to seeing whether Equities can make a bit more progress into end of month, or should fall right away and bottom out sometime next week. The broader patterns at this point remain intact for equity indices, though the momentum decline is a concern, while leading sectors seem to be falling by the wayside. A couple of strong days of movement higher which is not led by the leading groups and/or strongly positive breadth is a further concern given that trends from last week and the last few months remain negatively sloped. The next few trading days into May should speak volumes about whether a larger pullback is imminent or can be pushed off until late Summer/Fall. For now the degree to which we've yet to see the strong upward thrust in breadth and volume on rallies while Technology has been weakening, not strengthening, seems to be a concern.
Additional charts and thoughts below.
S&P- Bounce getting above 2660 was a minor positive but now is wrestling with 2675-7 while having pushed up into a key time for time change. Technicals have not really improved all that dramatically on a short-term basis given this bounce over the last two days as part of the existing downtrend. Yet shorts have a tight leash at 2677 and movement above would allow for gains into end of month before a May decline over the first 1-2 weeks. For now, prices have pushed up to whats considered make-or-break territory. The next couple days will be telling as to whether a reversal comes right away or whether prices can push up for another week before peaking. Yet.. make no mistake. the breadth has shown little to no upward thrust in 3/1 or 5/1 type gains which are broadbased which lends any trust to this bounce. It's very likely something to sell into, yet again.
AAPL ahead of earnings is simply not attractive to own at current levels. As weekly charts show the stock having stalled out after having hit the highs of this longer-term trend channel. Momentum has weakened in the last six months as a result of this stalling out since last November and prices are roughly unchanged since late last year, having experienced little to none of the giant rally into late January. With monthly charts showing prices having closed down at lows during four of the last five months, this looks unattractive at current levels. One would look to buy weakness near 130 and sell gains to 180, tactically, but plenty of stocks look like better risk/reward situations than AAPL presently.
Credit still in fine shape, it's Yields that have caused High Yield underperformance- 3.65% is key-
Some are concerned that High yield seems to be underperforming SPX this year, and think that should lead to a period of "RISK-OFF" While this could be true going forward, the fact remains that most of this underperformance in High Yield ETF's like JNK, or HYG is a result of interest rates having pushed higher, not true credit deterioration. Charts of Spreads of high yield vs Treasuries show very little change if any in the amount of real Spread widening. The Bloomberg Barclays US Corporate High Yield Average OAS spread lies near 340 basis points over Treasuries (based on the 5 yr yield), which is roughly in line with where we started the year. So we'll need to see this climb materially before getting all that worried about Equities falling because of Junk concerns. The one thing to note is that this daily chart has set up with a rather bullish pattern in the last six months, and this dip back down to recent lows, which represents a tightening in credit given the equity rally since April 2, has now begun to turn back higher. Gains back over 3.65 in this spread would lead to upward acceleration given the current structure, and this is something to watch for to have real concern about credit deterioration that could metastasize to the equity market.