April 4, 2018
S&P JUNE FUTURES (SPm8)
2584-6, 2556-8, 2532-4 Support
26430-3, 2640-2, 2647-8, 2550-5 Resistance
LINK TO TECHNICAL WEBINAR from Thursday 3/29- https://stme.in/0aEXIgQYR
SPX - (2-3 Days)- Bullish-Trend near-term bullish on ability to get through 2600 on the upside, which bodes well for a push up to 2640-60 into Wednesday/Thursday- Use minor intra-day weakness to buy near 2600, 2584-5
SX5E- EuroSTOXX 50- Neutral- Very choppy overlapping pattern since mid-February and difficult to get too enamored with SX5E until/unless prices get back over 3450. Most of the near-term swings over the last few weeks are still largely inconclusive and trendless, but SX5E still quite a bit weaker than the S&P, so remains a laggard and one to underweight via EZU.
HSCEI- Mildly bullish- It's right to make a stand after recent weakness down to lows just below 12,000 but which has resulted in some stabilization in the last week. But after the drop of nearly 2,000 points since late January, HSCEI is in dire need to hold 11800 and a bounce to 12,500-12600 looks possible.
Trading Longs: AEO, CAR, CNC, STZ, SHAK, HRTX, GTXI, AAN, MU, STX, FIVE, VICR, LULU, TLT
Trading Shorts: SIG, DO, CRK, SLB, SYY, BBBY, FB, DB, CS, XLI, PCAR, EZU, FEZ
Buy IWM 147.50-148.20, expecting a counter-trend snapback up to 155
Buy SPY 252-4, with targets near 270.
Long EURUSD 1.2276 to 1.23 with targets 1.2650 and stops 1.2240- Use break of 1.224 to exit, getting close to stop
Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Long TLT with targets 123.50
Bottom line, the near-term trend turned bullish early Tuesday on the ability of S&P to get back above 2600, which exceeded the triangle pattern in place and resulted in some short covering and a rush back into equities. The Equity put/call which had gotten close to 1, not matching the levels of Overall Put/call (index and equity), fell sharply back down to .65, showing investors jumping in to buy calls so as not to miss the potential rally. Breadth came in around 3/1 positive, while volume flowed into Up stocks at a 5/1 pace vs Down stocks. All 11 sectors rose on the day, with Energy outperforming along with Healthcare and Materials showing near 1.50% gains while Utilities, Real Estate and Telecom all lagged. Treasury yields rose for a second straight day, while the Dollar eked out further gains, threatening to break minor resistance which could see it trend further to the upside in the near-term.
Overall, a bit more strength looks likely out of this move, and technically we can make the case for 2650-60 to be tested, which in this market, doesn't mean much these days, given the return of volatility. However, it's important to reiterate that the trend has indeed worsened pretty substantially from mid-March, on the heels of the recent downturn from late January. Daily and weekly momentum indicators are tilted bearish, and trends remain still down from March 12/13 highs. So this has turned out to be a very different market than last year, or the year before, when a simple pullback could find support, stabilize, and then turn higher on good volume and breadth in a way that turned the trend back to bullish. Now we've seen nearly a 1.5% move off the lows, yet trends remain bearish and it's imperative to be a lot more selective, and utilize a "hit-and-run" mentality until a bit more stabilization occurs. The bullish factors of an increase in fear (contrarianly speaking) along with intra-day oversold conditions, positive momentum divergence, Demark signs of exhaustion, and a near-test of former lows from February were all thought to offer a good risk/reward to cover shorts and buy into this move, it certainly doesn't give us the "welcome mat" to stay for all that long, and the bears can very easily turn things lower in the next week again potentially if the S&P cannot successfully get back over 2660 given the uptick in volatility that this downward correction has brought about. We'll be selectively long for right now, expecting a bit higher prices this week, and we'll see the extent that this bull rise can materialize into potentially something more robust.
Additional charts and thoughts below.
Tuesday's S&P push back above 2600 creates a near-term bullish scenario given the successful move back up above the two prior lows from last week. Movement back into this range should cause near-term short-covering, and some buying as prices rise up to near 2640-60 in the upcoming days. Specifically the break of the former lows of the past week is thought to be constructive, but yet very well could prove temporary by end of week unless prices can manage to get back up above 2660. For now, it's worth playing from the long side into Wednesday/Thursday until/unless we reverse back to Tuesday's lows.
This daily S&P chart shows a much different picture than the hourly, and shows the kind of work that lay ahead if the S&P is expected to begin a much stronger move higher. While a 1-2 day move up seems likely, any act of creating hourly overbought conditions while the daily and weekly remain quite negative would argue for hedging any gains into mid-week, thinking that S&P still has an above-average chance of pulling back to test February lows this month.
Commodities look to weaken throughout this week given the break of the trend from December in the Continuous Commodity index, or CCI as of the last few days. Gold and WTI Crude have both pulled back a bit, while the US Dollar index has managed a slight upward break of the resistance that has guided DXY in the last few weeks. While this could prove temporary, in the short run ,commodities likely underperform this week before finding more solid footing as CCI carves out a possible TD Buy Setup into early next week. At present, despite the longer-term bullish view on commodities potentially making a larger move higher, the near-term view calls for a bit more downside this week.