The trading outlook for the S&P 500 Index and ETF (SPY) is slightly bullish into early next week, with upside being 426-428. That said, I feel it is right to pare down longs within Technology and hedge trades.
Trading cycles for the S&P 500 show weakness in late June and thus I expect a downturn is imminent. That said, Demark counts point to 3-4 days of possible strength which intersect the FOMC meeting.
The recent breakout is good from a price perspective, but breadth was negative. We could very well see a stall and reversal next week. Thursday’s price action wasn’t too convincing breadth-wise, which was negative as six sectors fell on the session, yet it was the important ones that mattered, and Healthcare and Tech both showed good relative strength and look likely to carry prices into early next week ahead of a peak.
While cycles show the potential for weakness into late June and particularly as Equities enter July, for now the Demark counts along with the actual pattern improvement Thursday likely means a decline could still be a bit premature. Overall, as discussed yesterday, I am on board for any evidence of reversals of trend given momentum, breadth, cycles, sentiment showing warnings. Yet, price wise, we’ll need to see some evidence of weakness first. The next 3-5 trading days should be key, and ideal scenario would be a slow rally which stalls out into FOMC.
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