May 3, 2018
S&P JUNE FUTURES (SPm8)
2623-5, 2611-3, 2600-2, 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- S&P closed down at important hourly support near Tuesday'sintra-day lows, but structurally, momentum along with the broader trend, is getting worse. a defensive stance is preferred, with breaks of 2623 resulting in an immediate test and break of 2611 on its way to the mid-2550's.
SX5E- EuroSTOXX 50- Weakness possible to play catchup with US- Prices have gotten above areas of resistance, and will need to undercut 3464 to think trends are turning down. Given that US turned down after Europes close, i expect Europe likely backs off a bit and weakens, but has clearly been outperforming in the last month.
HSCEI- Bearish- Prices flipped right back after minor trendline break, so this casts some doubt as to the legitimacy of the breakout, given that it lasted just one day and has now reversed. 11855 key to hold, while over 12361 now needed to think trend is turning back higher.
Trading Longs: NEE, FE, ETFC, IBKR, TWLO, HQY, CAR, ENTA,
Trading Shorts: LL, C, WFC, USB, GILD, 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 following the minor bump post FOMC to close near the lows of the session, much to the dismay of investors which expected AAPL, or the FOMC meeting to give the market a bit of confidence. As Bob Pisani on CNBC put it yesterday.. The Bulls have lost the narrative, and have to regain it quickly." Unfortunately, there's no real narrative which aptly describes a cyclical downturn which cares not about earnings, nor Fed-Speak. Given that earnings have never been a great predictor of stock prices, it's always wise to keep a close eye on the underlying trend and on momentum for evidence of divergences. The concept switch of Good earnings becoming "peak earnings" will continue to be an issue, but doesn't have much explanatory power to the ebb and flow of stock prices on a day to day basis. The trend, unfortunately for the bulls, has been negative since mid-March and also from late January as part of the larger consolidation. With fear not at sufficient capitulatory levels to think lows are in, minor bounces have been met with selling pressure, which technically could lead to an upcoming test and potential minor break of February/April lows into next week. For a bullish stance, we'll need to see some evidence of the NASDAQ and Technology in particular breaking out of its range and Financials following suit, which given yesterday's close, seems premature.
Given the breakdown in Financials, Industrials, and more recently, Biotech and Semiconductor shares, its difficult to see what group should begin to lead, outside of a bounce in the defensive Utilities and/or REIT group if yields can hold on and not push immediately back to new highs. Staples continue to be under severe pressure, and the US Dollar's surge has been relentless lately, though getting very stretched, while Euro and "Swissy" sentiment is turning quite bearish. An oversold bounce looks to be around the corner for the US Dollar which should be a positive for commodities. The key index for the equal-weighted Commodities space, the CCI index, has traded up to test very important area of multi-month consolidation resistance which should be exceeded in the months ahead. For now, getting a meaningful pullback in the Dollar is likely pivotal for this trade to gain more traction.
Additional charts and thoughts below.
S&P failed to lift post FOMC, and the break of 2640 caused a fall to test Tuesdays' lows, which are thought to be quite pivotal to this entire structure, and more important at this point than 2611. Breaks of 2623, structurally, have little support until the high 2500's, and this break likely should bring about sufficient fear to generate a trading low as markets near 5/7-9. However, the larger trend is coming under tremendous pressure in losing momentum lately, as daily and weekly MACD remain negative, while the entire structure appears like a descending Triangle pattern. This could prove problematic if 2500 were to be breached, bringing about a violation of the entire pattern since 2016. This in turn would give rise to sufficient momentum deterioration to think the peak in late January in turn was the start of a larger rolling over in the entire uptrend from 2009, with any rally back to highs into Summer/Fall and/or end of year being one to sell into. For now, this prediction is well premature, but the momentum loss is troublesome, and near-term, the patterns have been worsening with no apparent rhyme or reason with regards to fundamental or macro data.
The violation of April trendline support by the Financials is a negative development, and given the Fed's lack of a hawkish spin to help support this group, further technical weakness looks likely which should take XLF back down under $27 before any meaningful low is in. Specifically, the pattern in the last couple days is very choppy and consolidation like after last week's break, a technical formation which supports the notion of this being a likely fourth-wave type pattern and should lead back to new lows. Bottom line, buying into the Financial space looks premature, and it's best to avoid and/or short selective Technically poor names for a pullback in the days ahead.
The Gold miners got a much needed bid yesterday, as Gold rebounded from the consolidation lows near 1300 to turn higher at a time when the Dollar had become quite overbought. This group looks likely to benefit further and rally in the days/weeks ahead given very bullish sentiment on the US Dollar/negative sentiment on Swiss Franc with DSI readings in single digits as of yesterday evening. Technically the break of the downtrend from mid-April is a positive for this group, and any pullback in the US Dollar in the days/weeks ahead should spur a bid to the Metals and to Gold mining shares. Technically this hourly chart shows the pattern of a developing Cup and Handle pattern which would be confirmed on a move back over 23.40. Thus, buying the gold mining group here through GDX looks like an excellent risk/reward with stops at 22 and upside targets initially near 23.40 but over allowing for an outsized move to the upside.