April 5, 2018
S&P JUNE FUTURES (SPm8)
2618-21, 2597-9, 2584-7 Support
2660-2, 2677-9, 2683-5 Resistance
LINK TO TECHNICAL WEBINAR from Thursday 3/29- https://stme.in/0aEXIgQYR
SPX - (2-3 Days)- Mildly bullish, but looking to sell into strength near 2660 Thursday/Friday, expecting to have a chance over next week to buy dips after yesterday's strong surge. Still tough to rule out a complete retrace of the sharp move from Wednesday, but feel market overall is beginning a bottoming process.
SX5E- EuroSTOXX 50- No change- 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. Buy SX5E near 3260 while looking to sell 3400-3450.
HSCEI- Mildly Bearish- Downside seems limited, but with a chance of pullback to 11425 while over 12400 would allow for rally. Trend remains bearish but prices have pulled back to February lows where support might help prices stabilize in the days ahead.
Trading Longs: PM, PANW, AEO, CAR, CNC, CELG, STZ, SHAK, HRTX, GTXI, AAN, MU, STX, FIVE, VICR
Trading Shorts: SIG, DO, CRK, SLB, SYY, BBBY, FB, DB, XLI, EZU, FEZ
Long SPY up to 265- Above 270 look to Short SPY 273 for a move back to 255
Long XLV 81.50 or better with targets near 85
Long XLP 52.83 up to 54.50
Long GBPUSD 1.408 with stops 1.40 and target 1.45
Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Yesterday's shakeout keeps the trend near-term bullish, but now approaching the first meaningful upside target near 2660 and hourly momentum has gotten overbought given the 85 handle move in S&P from early lows to over 2640.. while Daily and weekly momentum along with the trend from mid-March remains negative.
So while yesterday DID look to be a strong reversal, it's still tough to think there's immediate followthrough, and technically it's right to think this volatility very well can continue, and right to use strong rallies to sell into, while looking to buy dips if given the chance over the next few days.
On a 6-8 week basis, technically it's right to think that there is a definite bottoming "process" at work, which has been noted in recent days given the start of breadth turning up, while momentum is getting "less negative" on a daily basis. The protectionist worries which have gripped this market of late have caused anxiety during a time when prices have pulled back to right near February lows, yet the larger uptrends remain very much intact from 2016. Until we can see some evidence of trend damage on a large scale, it should be right to use weakness to buy, thinking a larger rally can happen into the month of May. For now, technically there remain issues with chasing yesterday's move, as this volatility isn't any different from what we've seen in recent days, and the 2-3 week structure right now remains bearish and has NOT yet changed to positive, despite the large reversal from yesterday. Overall, a hit-and-run mentality remains prudent.
Additional charts and thoughts below.
Yesterday's dramatic about-face keeps the thinking intact that S&P has begun a bottoming process, yet at current levels, price looks to be up against important levels from mid-March. While it's likely correct to be long here on a 4-6 week basis given the recent stabilization attempt and increase in positive breadth, in the near-term prices might not have as much upside, and it looks right technically to consider selling into this move near 2660 just about 10 points higher, which is a definite "stone's throw" after the 85 point rise from yesterday's early lows. So tactically, flattening out into Thursday/Friday looking to buy dips makes sense. Or for those with a lengthier time horizon, making sure Shorts are covered and having small long positions, looking to add on any weakness into early next week also is practical.
Homebuilders looked to have managed a very sharp reversal yesterday that exceeded two prior highs when going back since early February. This is a bullish development technically that bodes well for additional gains in the weeks ahead. While the near-term momentum has become overbought based on yesterday's move, it's right to have a bullish stance on the Builders, looking to use weakness to buy dips in the days/week ahead. Favorite Builder and builder related stocks include LEN, MHO, and MHK. The ITB, shown above, should be bought in small size at current levels, looking to add on pullbacks down under $40.
Healthcare looks to be turning higher, as seen by XLV confirming counter-trend Demark related buys, along with meaningful upside progress and structural improvement out of both XBI and DRG in the last couple days. The DRG, or AMEX Pharmaceutical index, shown above, will successfully break out above the downtrend on movement above 535, which i expect likely happens in the next week. Favored stocks overall within Healthcare include: ALGN, ZTS, CELG, GILD, UNH, & ANTM.