S&P 500 Mid-Day Technical Trading Update – May 17

Stocks are getting hit hard today across the board, with the S&P 500 Index (INDEXSP:.INX), Dow Jones Industrials (INDEXDJX:.DJI), and Nasdaq Composite (INDEXNASDAQ:.IXIC) all down over 1 percent each at the time of this publication.

Here’s a mid-day stock market update and trading outlook.

S&P 500 Update & Trading Outlook

If the S&P 500 closes under 2381 by today’s close, then weakness should continue.  IF we hold this level, however, weakness may be postponed. If stocks don’t firm up soon, the S&P 500 may weaken further into month end. But this looks to be short-term in nature and not a serious correction. Look for me on CNBC later today to discuss current state of market.

S&P 500 Support Levels To Watch:  2322 and March/April lows;  then 2290-2305

Today’s move was rather unexpected. After a huge period of non-volatility, today provided the energy that breaks that wide open.  (Think of a coiled spring that has just been let loose). 15 straight days of closing within 0.50% of prior days close (the longest string since 1968 according Ryan Detrick of LPL).

When things like this suddenly END, they don’t normally just snap right back.

Here’s a list of positives and negatives from macro trading position: 

Positives:

• Advance/Decline still within striking distance of April highs.
• Long-term structure intact.
• Technology still working well , along with industrials, discretionary, and health care.
• Sentiment. – Economic reasons for bullishness.  But marketwise, still some negativity based on DC drama.
• VIX low- Likely FRUSTRATION and low volatilty. Not complacency.

Negatives:

• Near-term trend violation- Short-term support broken.
• Breadth/participation-  Rally being carried by a few. Mid-caps have not broken out to new highs, nor have Small-caps. But AAPL goes up every day.. Less than 60% of all stocks are above their 50-day ma and 200-day.
• Financials rolling over.. relatively speaking hitting new weekly lows-   YIELDS led this down last FRIDAY-  now stocks following suit.
• Very overbought.
• 20-week cycle suggests downward bias .
• Tech VERY OVERDONE. And nearing resistance-  if TECH peaks and Financials roll over that would be 38 percent of the S&P 500.
• Seasonality.

Get more of my ideas and daily trading insights over at Newton Advisor.

Thanks for reading!

Twitter:  @MarkNewtonCMT

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