S&P 500 Index Futures – November 19, 2019
S&P 500 Index Trading Outlook (3-5 Days): Bullish
Despite the stalling out in breadth near-term, prices haven’t yet shown evidence of breaking uptrend lines, and as such, it pays to simply respect the trend until broken.
Under 3100 would be the first evidence of weakness, while over 3127 leads to a final push to 3150-5.
The S&P 500 still finding ways to push fractionally higher, despite negative breadth and evidence of near-term overbought conditions, which are the highest since January 2018.
Four of the major 11 sectors were down on the day, and breadth turned in its six negative reading in the first 12 days of November. Only two sectors were up more than +0.50%, namely Consumer Staples and REITS while Energy suffered again, dropping more than 1.25%. Energy is now barely up for the year, higher by just +2.54% and is the only one of the major sectors down on a 12-month basis, lower by a whopping -12.21%.
Unfortunately, if projected dropoff in demand materializes, and Crude obeys its normal period of seasonal weakness and drops into the 40s, we could see even further losses in this group into Winter before some stabilization.
Overall, we’ve reached a point in the rally where many bullish Twitter users, who are involved in the Financial space, are going out of their way to mock the Bears, which normally is a time to pay attention, for those that track sentiment.
Moreover, quite a few financial media guests in the last week made the point to hammer home that they “were bullish and it’s right to be in Stocks” Given the drying up in breadth, i don’t view this area as all that attractive of any area to be sticking one’s neck out to pound the table on buying stocks here. However, until trends show more evidence of weakening, the bulls are certainly right to stick with the ongoing uptrend.
The complacency, however, seems to be growing, and even negative trade news, highlighted yesterday on China’s supposed skepticism on a trade deal given that Trump refused to rollback the Tariffs,, failed to result in any drawdown in stocks. So looking back, the news on a possible trade deal caused a huge rally from early October. Yet now, on evidence a meaningful deal could be tough to come by, equities have barely registered any signs of weakness. Normally, this merits paying attention closely. Demark signals lie on a 12 and 10 count in S&P 500 futures, while VIX shows an 11 count on the downside. Stay tuned.
For now, it’s right to concentrate more on WHAT IS working, as opposed to coming up with a multitude of reasons why the stock market “should” be going down, but isn’t. Outside of Healthcare, one of those positive forces, as of late, seems to be Consumer Staples. We’ll highlight this chart below and discuss.
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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.