July 11, 2016
S&P SEPT FUTURES (SPU6)
2084-6, 2073, 2057-8, 2043 Support
2104-5, 2119-21, 2131-3 Resistance
US indices have led many other world indices back to new all-time highs, when looking at the SPX's surge late last week.
Last week's push to new all-time highs in SPX is a bullish technical development near-term and shows no real signs that immediate reversals should occur. This move should be followed by DJIA(which is only ~200 points away), while NDX, CCMP remain a ways off (5-6%) and RTY, TRAN are even further away (10-15% off all-time highs.) However, to think this is just an SPX phenomenon is misguided, as the A/D lines for S&P 400, 500 and 600 are now back at all-time high territory. The move back to new highs happened on some of the heaviest Volume A/D stats in history, with over 95% of stocks rising vs falling, and groups like Healthcare and Industrials showing good participation last week while Consumer Discretionary led all sectors, being up over 3% on the week. Over 96% of stocks are now above their respective 10-day moving average, something which suggests potential upside exhaustion, but until there is ample evidence of this, it's right to stick with longs, looking to add on dips in the days ahead. Key developments which were cited as reasons markets could in fact breakout had much to do with the ongoing bullish momentum and breadth, with the NYSE Advance/Decline having recently pushed back to new highs. While Europe along with most of the Developed and Emerging market world remain far weaker and well off the highs, this divergence is not something that suggests S&P should immediately reverse. Many investors have remained on the sidelines and were defensive, and will now be forced to chase this move in stocks to new highs
The bond market should start to selloff in the days ahead. Bonds showed only scant signs of rolling over last week, but still look primed to do so in the days ahead, based on factors such as overly bullish sentiment for Treasuries, stretched oversold conditions for bond yields, and a confluence of Demark indicators such as TD Sequential and TD Combo lining up to suggest an upcoming rally in yields should be getting underway soon. ETFs such as TBT could be considered technically and/or selling into TLT longs
Sector-wise, Healthcare, Technology and Consumer Discretionary could start to show real outperformance after a strong week last week while these sectors have underperformed substantially on a year-to-date basis. So these are definitely ones to selectively buy, while eyeing Financials for more evidence of this sector turning up as well, which would happen with a reversal higher in Bond yields.
The US Dollar still looks more bullish than bearish at current levels as gauged by DXY charts, which are largely vs the Euro. But upcoming BOJ stimulus should have some effect on turning the Yen back lower given the massive Spec Long positions in the Yen, now that world equity indices have stabilized. Pound Sterling also has done sufficient damage to think that bounces here likely prove short-lived vs the US Dollar and that Sterling weakness is a better bet than serious comebacks in the months ahead. Finally, the uncertainty regarding the BREXIT and possible additional countries joining suit should make the Euro face considerable pressure vs the US Dollar. Some of this was evident after the breakdown of the six-month uptrend. Pullbacks under 1.10 should lead down to 1.0822, while DXY could push higher to98. While precious metals are extended and ripe for at least some consolidation, this might be put off until Gold gets up to near 1400-1425 given the ongoing strong momentum.
Short-term Thoughts (3-5 days) : Bullish- Breakout to new highs has little resistance until near 2182-2187 for SPX cash after this breakout, so near-term pullbacks on Monday/Tuesday should still be buyable for a further push higher. While intra-day charts are overbought across many spectrums, neither daily, nor weekly charts are all that overdone, and with Advance/Decline lines back at new highs, it still warrants participating in this move, being long and buying dips.
Intermediate-term Thoughts (2-3 months): Bullish- Last Week's breakout to new high territory for SPX likely should soon be followed by other indices such as DJIA while NDX, CCMP should push up to test former all-time highs from last year. While the ongoing lagging in Transports and Small caps is a concern, as these remain 10-15% from all-time highs and similarly, most of the world remains well off all-time highs, it's right to stick with US stocks until some evidence of counter-trend sells arise or breadth starts to falter meaningfully in a way that would lead to a top in stocks. Both daily and weekly momentum as per MACD are positively sloped, while monthly is sloping upward and close to turning back positive for the first time since early 2015. Bottom line, with Advance/Decline at new highs, it's difficult to fade the market, and the lagging sectors have all started to bounce in a way that should lead to some mean reversion in these sectors. Key cycle dates for trend change lie in late August, and very well could lead to a peak in stocks, but for now, it's right to stick with this trend on an intermediate-term basis until ample signs of weakness arise. The other concern is that given the degree of deterioration in momentum last year into those August lows, even this push to new highs won't allow momentum to get anywhere near where it was back in late 2014/early 2015 and this is a 12-18 month concern. For now, for this time frame, additional intermediate-term strength still looks probable with key targets at 2180-5 and then 2250.
10 Breakout Stocks To Consider after last week's SPX move to all-time highs
Fidelity National Information Services, Inc (FIS- $76.03) Bullish and the ability to reclaim early June highs very quickly after this minor selloff attempt is a real positive for the 4-6 week prospects for FIS. It's pattern resembles a Cup and Handle pattern following its initial peak back in 2015 which lead to a nearly $25 loss in the stock into early February of this year. However, the act of reclaiming these highs after just minor consolidation is seen as a good sign and should lead higher up to $80 or above with intermediate-term technical targets near $90. Overall a good candidate to consider "chasing" this SPX move back to new highs as this underwent severe consolidation for nearly a year before the recent breakout and now should face far fewer limitations technically in terms of immediate upside resistance.
United Parcel Services (UPS- $109.52) UPS' ability to have surpassed former highs from early 2016 and late 2015 just in the last week should give this some upward acceleration that helps UPS move higher to test its former all-time highs from late 2014 at $114.40 with additional near-term support at $117.50. The stock has been basing since late 2014 after a stellar rally from 2009 lows, and looks to be embarking on the final push of this giant long-term uptrend in its latest push higher. Near-term weakness after the last six of eight UP days should find ample support near $106-7 and allow for an outsized advance that gets this up to $114.40 without too much trouble. Similar to other stocks listed here, momentum is not all that overbought given the recent consolidation, so the new-found surge in momentum is likely to offer a good opportunity to buy this here and expect further gains, technically speaking.
Lam Research (LRCX- $84.88) LRCX is right on the verge of a large breakout of a consolidation pattern that's been intact since late 2014, which makes it an attractive risk/reward technically speaking to own now and add to gains since this clears $87.19 which was hit on an intra-week basis two weeks ago. The pattern in the last 18 months resembles a larger Reverse Head and Shoulders pattern with an increasing slope of higher lows since last year, while highs have been made in the low $80's. Given the recent advance in Semiconductor stocks vs other parts of Technology, it's likely this can also make a sharp move and begin a more steady period of outperformance. Technically this looks quite good to buy here and add on any weakness with upside targets initially near $90 and then $100.
Lowe's Co's (LOW- $82.34)- LOW has just exceeded the highs of a 17-month consolidation that's been intact since February of 2015. This stock has been a laggard vs Home Depot for some time, but began to play catchup around 2012 and at present, remains preferred to own technically speaking. Its push back to new highs should allow for further strength up to near $90, and suggests that any near-term weakness likely holds in the high $70's before pushing back to highs. Momentum is positively sloped while not overbought on weekly charts given the 12+month consolidation in the name. Thus, a breakout in the market that coincides with LOW also making the same move makes this stock interesting in thinking this can likely push ever higher. Overall, a technically attractive stock which had based after a lengthy uptrend and now looks to be pushing up into another uptrend for the first time since early last year.
Casey's General Stores (CASY- $134.19) CASY has just managed to exceed late 2015 highs after a very tight V-shaped consolidation pattern as part of this uptrend, and this breakout should lead the stock up to at least $141-$142 before much of a slowdown. The longer-term pattern shows various consolidation breakouts which have happened over the years, each leading CASY higher without much pullback, and would expect this also follows suit similar to past occasions. Any near-term weakness should find support near $129-$132 and offer good opportunity to buy dips for a continued rise. Momentum, as might be expected, is positively sloped and just nearing overbought levels on weekly charts, as the last six months of consolidation helped to alleviate this overbought condition.
Bristol Myers (BMY- $75.28) BMY is just in the process of breaking out to new all-time highs which was achieved on a closing basis last week, though the stock fell just shy of exceeding intra-week all-time highs made back in 1999, nearly 17 years ago. This giant rounding formation should give way to continued strength once officially exceeded, which arguably is happening now, and upside targets near-term lie at 77.50 then 80 with intermediate-term targets at $90. Pullbacks to the low $70's would offer an even better risk/reward to buy and only if this gets down under $70 would it postpone the push higher. For now, one of the better acting stocks within Healthcare that's just in the process of breaking out.
Intuitive Surgical (ISRG-$678.84) While already extended by 7-8% above its breakout point, ISRG remains attractive to move higher technically and continues to show outperformance within Healthcare as one of the top performing names. Given that Healthcare has just shown evidence of trying to work higher, this stock should continue to demonstrate good leadership given very little overall deterioration in price. Pullbacks down to $625-$650 would offer an ideal risk/reward buy for ISRG, but even at current levels, its likely to reach $725 without too much trouble technically, with intermediate-term targets near $800.
Verisk Analytics (VRSK- $83.40) VRSK's ability to exceed both early 2016 as well as 2015 highs makes this pattern resemble a Cup and Handle breakout which should allow for VRSK to trend up to near $90 before any real peak. The stocks near-term overbought condition on daily charts is not as important as a negative when considering these two former highs which have been surpassed, and should help any minor overbought condition which pulls back to prove short-lived. Upside looks about 10% higher in the near-term while $76 should be a level for trading stops which would postpone this rally. For now, this continues to look quite attractive on a near-term and intermediate-term basis.
Universal Display (OLED- $70.69) This stock's push back to new all-time highs exceeds 2011 highs which have not been tested in over five years' time. Prior to this large base, OLED had achieved a near six-fold move in price and its current monthly chart resembles a large rounding bottom formation. Upside technical targets lie at $80 while any pullback to $67-68 should be an excellent chance to buy dips. While momentum has neared overbought levels of late, the stairstepping price action in this stock since mid-2015 should lead this to move back above early June highs in the next 1-2 weeks and push higher to $80. Overall , OLED looks quite attractive on a 1-2 month basis for further upside, technically speaking.
Synopsys (SNPS- $54.25) June's push back to new all-time highs for SNPS keeps this stock in very good technical position, and additional upside looks likely to near $58 in the near-term before even minor resistance crops up. The long-term base in SNPS was exceeded back in late 2013 which gave way to a near 50% move in shares up to the mid-$50's, and the stock still has shown very little signs of any real technical weakness. While weekly momentum is just getting to near overbought levels, most Demark signals remain at least 4-5 weeks away at a minimum, suggesting that any near-term pullback should be bought for higher prices in the months ahead.
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