May 24, 2018
S&P JUNE FUTURES (SPm8)
2698-2700, 2682-3, 2666-7, 2649-52 Support
2741-2, 2747-9, 2753-5 Resistance
LINK TO TECHNICAL WEBINAR from last Thursday- 051718- https://stme.in/MpyuOSOZca
SPX - (1-2 Days)- Bullish- Yesterday's pullback proved shortlived, as Financials and industrials pulled back to retest areas of their recent breakouts. The strength in Tech was notable, and until markets show more evidence of failing, it pays to stay bullish. 2750-5 still looks possible
SX5E- EuroSTOXX 50- Bullish for a move up to 3600-3650. No change- Tuesday failed to capture the SPX's pullback, and it still looks like rallies can happen and its Early to sell.
HSCEI- Mildly bearish given Dollar gains and could allow for fractional weakness to near 12k, and one should consider buying near 12100 over the next few days on any weakness.
Trading Longs: BAX, BSX, CMA, VOYA, STI, TROW, SCHW, AMTD, TCBI, NTRS, IYT, UNP, FDX, TWTR, LVS, WYNN
Trading Shorts: LL, CBOE, USB, MAT, DISH, REGN, DISCA, MCK, ABC, CAH
Long XLF targeting 29
Long XLI targeting 78.25
Long IYT targeting 200-1
Long SPY targeting 275.5
Long TBT 38.10 with target 41.25
Short XOP targeting 40
US indices successfully rebounded, and yet again, it looks premature to make too much of the weakness of the last couple days. The snapback following the Fed minutes helped Technology gain quite a bit of ground, while Transports and Financials both battled back after early pullback attempts. Sectors like Energy fell for the second straight day, but held its uptrend as per XLE, OIH and managed to close well up from early lows. Bottom line, the weakness was seen as insufficient to think any sort of pullback is underway, but merely one day of selling and then yesterday's rebound helped markets rally back. Until S&P can get under 2700, trends are bullish, and similar to yesterday, dips should be bought. Technology in particular should be an area of focus given its ability to stabllize after the last week of underperformance.
Bonds continued higher and 10year yields closed fractionally under 3.00%, while the US Dollar index rose to slightly over 94 before retreating a bit late day. Technically speaking the US Dollar looks to move to 94.50 but is growing overbought and nearing exhaustion near-term. The ability of this to peak and turn lower would be bullish for Emerging markets, which for now, still looks a bit premature. Bottom line, a rising Dollar has caused some lagging in EM, but not much absolute weakness, and for US equities, the sector strength seems to be suggesting that rallies can still happen.. If this fails to be the case and Financials, Tech, Industrials all turn lower and erase their breakouts, than this will be addressed.
Additional charts and thoughts below.
Don't look now, but Technology has started to stabilize yet again after just a minor pullback relative to SPX. It was mentioned recently that both Tech and Financials had been lagging. This relative chart of S&P 500 Information Technology index to the SPX did in fact peak out two weeks ago after having gotten overdone. Yet the selloff has proven pretty benign thus far, and we've seen two straight days now where Semiconductor stocks outperformed in a bad tape (Tuesday) and now yesterday where Tech rebounded to show better performance than all other 10 sectors. Breadth was positive and this should give Bears caution who are looking for weakness. Overall, given that Tech makes up 25% of SPX, watching this sector carefully, both on an absolute and relative basis makes a world of sense.
MSCI Emerging market Index, or MXEF, looks to be near critical near-term support which should provide some stabilization and a bounce in the weeks ahead. While the currencies have experienced parabolic signs of downward acceleration of late the equities have been far more subdued. Relatively speaking, emerging markets have certainly underperformed in the last month following the breakout in the US Dollar index, yet on an absolute basis, we see MXEF having not even breached February lows. Until/unless prices break 1100 in MXEF and violate the longer-term two-year uptrend, trends are bullish and it should pay to buy dips early next week, thinking that Dollar weakness might help this group bounce after some recent underperformance.
The US Dollar index looks to be nearing a very important area, based on the rise to its weekly Ichimoku Cloud, which is downward sloping and large in size. Weekly chart resistance is now 2-3 days away from confirming some of the warning signs seen developing on Daily charts that suggest next week could be important in putting a high in on the US Dollar index. A stalling out and downturn in the Dollar while most are now expecting ongoing upward acceleration would likely prove to be a boon for Emerging market equities and potentially currencies also to snapback, while providing some bounce to commodities which have been under pressure for the last month.