S&P 500 Trading Outlook (3-5 Days): Bullish barring a break of 2900
Until then, trends remain positive and additional upside for stocks is possible this week.
Above 2915 on the S&P 500 is bullish for a move up to 2945-9
The key technical development revolved around Financials turning higher on an absolute and relative basis along with Treasury yields, which had both been lacking throughout the month of March.
Chart Spotlight: The Financials (XLF)
Financials have gained some near-term momentum with the move above this trendline relative to the SPX. This is a positive technical development and likely does serve as a factor that can keep the broader market afloat a bit more.
As this daily relative performance chart vs SPX shows below, the XLF managed to breakout of this downtrend vs SPX on a near-term basis, and should allow for this group to outperform near-term in the next 3-5 days. For greater signs of outperformance we’ll need to see the larger trend broken, which for now is premature.
This move in Financials is important given the percentage of this group of the SPX and it was thought that that the divergence in Yields and stocks also was a concern. Historically, yields turning down has led to stocks also following suit.
This time around, stocks and bonds have been able to move higher in tandem, but now yields are turning back higher to join the recent stock rally. This is encouraging to see other sectors start to pick up the slack after having underperformed, and it’s thought that a similar move in Healthcare is right around the corner.
Unfortunately, this comes at a time when momentum has gotten overbought and sentiment has switched back to more bullish, so the larger upside to this rally appears limited. However, near-term, there doesn’t appear to be much resistance above 2915 until 2945-9. So until there is evidence of 2900 being broken, it’s thought to be still wise to favor Financials pushing higher and SPX following suit.
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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.