May 2, 2018
S&P JUNE FUTURES (SPm8)
2622-3, 2611, 2552-3 Support
2666-8, 2675-7, 2681-2 Resistance
LINK TO TECHNICAL WEBINAR from last Thursday, 4/26/18- -https://stme.in/yadt92dtNf
SPX - (1-2 Days)- Bearish- Late day rally should find resistance at 2665-70 before turning back lower with key areas for time change near 5/8-10. At present, there are insufficient signs of a low in place for US stocks, and many sector ETFs like XLI and XLF maintain bearish posture and look to have more downside. Use early rallies to sell Wednesday as over 2682 needed for any type of bullish stance and the odds favor a pullback over the next 7-10 trading days before any low is in for the US.
SX5E- EuroSTOXX 50- Bullish- Prices have gotten above areas of resistance, and while nearing overbought levels, do not show counter-trend indications of exhaustion and Europe has been outpacing the US since mid-March with prices having held up and not declined despite the US having turned down. While this has faltered a bit in the last few days, Europe might hold up a bit better over the next few days before turning down relatively again. Movement to 3586 looks likely and above could allow for a brief test of 3659 which would represent a chance to sell.
HSCEI- Bullish on the ability of prices to have exceeded highs since early April which effectively breaks out of the downtrend from late January. This looks to lead higher, and at present, looks to outperform the US.
Trading Longs: GPN, NEE, FE, BKE, TWLO, GSK, HQY, CAR
Trading Shorts: C, WFC, UTX, ITW, XLI, XLF, HOG, CBS, CMCSA, VIAB, LUV, SMH, AMAT, MCHP, NTAP, IBM, BBBY, EMN, PCAR, CLVS, MNK
Short SPY from 265, with targets down at 256.
Long GLD under 123.75 , with expectations of a rally back to near 128.36 initially
Long DBC for commodity exposure- targeting $17.85
Long XLU with targets at 52.40
Short XLI with targets 70.25
Short XLF with targets
Short IYT 187.62 with targets at 181.50
Short SMH with targets adjusted downward to 92.50
Long EURUSD 1.1995 with expectations of a bounce back to 1.2150
Exiting TLT after yesterday formed a bearish reversal which could allow for a retest of lows before more upside
Stocks reversed off Tuesday's lows to close mildly positive, yet failed to accomplish much from a price or time target standpoint that would suggest meaningful lows are in place. There were some indications of breadth yesterday at the lows showing better ratios (2/1 negative) than had been seen at higher levels earlier in the day (3/1) which was a partial positive signal that potentially a snapback rally could occur. Yet, momentum gauges failed to signal any positive divergence on hourly charts and gains still haven't gotten above key areas which need to be exceeded to think any type of material low is in. Movement above 2683 would be something to pay attention to, but for now, counter-trend rallies like what was seen Tuesday look to be temporary reversals designed to shake out shorts before the trend resumes. Key times for trend change lie between 5/8-5/10 this month, and then 5/19-20, so it still appears likely that weakness can occur into mid-month, and no evidence of any real capitulation was present in volume or breadth to suggest any sort of a meaningful low.
Looking back, Industrials ETF, XLI broke down to the lowest levels of the year before snapping back to just barely regain early April lows. Financials also fell to new multi-day lows when viewing XLF before bouncing, but both look to be in poor technical shape and trying just to "hang on for dear life". Counter-trend signals of exhaustion are premature on both sectors, and yesterdays' snapback should be premature. Technology meanwhile which had held up relatively well and outperformed yesterday, still is trending in a very tight consolidation pattern that doesn't yet appear like a chance to buy. However, prices are nearing the apex of this wedge pattern and breaks of either side of this pattern likely will lead to follow-through and should be followed. For now, the defensive sectors have more appeal in the next week.
Additional charts and thoughts below.
S&P looks to have snapped back to right near attractive levels to sell per Tuesday's close. As hourly S&P Futures charts show, the area at 2667-9 looks quite important and should represent an area to lighten up, hedge and/or seek out trading shorts on this bounce. While Tuesday's late day reversal might seem encouraging on a one-day basis, momentum remains flat over the last couple weeks, while trends and momentum remain lower on weekly charts from mid-March and late January. Cycles based on the decline from 1/26 into 2/9 suggest that 5/8-9 should be an important time for trend change, which very well could signal a low to this correction. At present though, this is premature The risk/reward favors using gains like yesterday's to favor the defensive sectors like Utilities and REITS in the short run, while avoiding Technology, Industrials, and Financials.
Industrials continues to look bearish technically and Tuesday's reversal to hold early April lows looks temporary, representing a selling opportunity for pullbacks down to near 70 over the next 7-10 trading days. Counter-trend exhaustion does not yet look complete, while many stocks within the Aerospace and Defense group, along with GE, still look negative technically and appear premature in terms of bottoming. One can avoid buying dips just yet in XLI, IYT, or ITA, and relatively should expect that recent underperformance should continue in the short run over the next 1-2 weeks before any bottom.
Apple's post- earnings bounce in the after-market reached briefly over 174, but it's worth mentioning that we'll need to see a lot more progress to think this stock has regained any real "mojo" as trends have slipped in relative terms vs QQQ and SPX since it peaked last November. Weekly charts show the stock having gained ground to the highs of the uptrend channel near 180 and this area looks quite important to the stock as area where this should stall out and peak in performance. Daily charts above show the area at 176-177 as having significance given the minor downtrend from March highs as part of the neutral range in the past five months. So technically speaking, bounces into Wednesday's trading should represent a chance to sell into this spike, not think a move back to new highs is forthcoming. As mentioned in prior reports, AAPL has consistently shown turns in the last few years near the 26-27 week mark, (which can be sent out to those interested in a separate report) Bottom line, this sudden "About-Face" on Tuesday looks premature to mark any sort of meaningful low in the "FAANG" group, so rallies likely should turn out to be chances to sell for a pullback into more meaningful lows into mid-month.