S&P 500 Trading Outlook (3-5 Days): Bullish, but two straight days of stalling out is concerning.
Though this sort of price action still isn’t sufficient to call a trading top, it’s worth watching.
DeMark exhaustion is still premature by 2-3 days so we are leaning bullish until we see a breakdown.
Stops on a close below 2880 for longs while resistance is likely near 2930.
S&P 500 Futures Chart Analysis
The S&P 500 has now pulled back for two straight days from intra-day highs, yet has barely made any real headway to the downside. Similar to yesterday’s message, after 6% gains in 6 trading days, prices are getting stretched, but we’ll need to see more to have any real conviction of prices turning down. Under 2880 would allow for minor weakness, but only a move under 2837 should result in a larger decline.
Meanwhile, upside targets lie near 2830 up to 2845 and should be more likely than not, given the incomplete Demark signals coupled with ongoing uncertainty amidst a positive momentum trend. Yet, breadth has been very mild of late on this rally, and nearly flat for the last few days. This should be watched carefully in the days ahead for evidence of any negative breadth on gains, or other signs of Tech or Financials stalling after this bounce. For now, it’s right to stay bullish, but yet proper to keep a close eye on the exits which i think could be prudent by end of week from a trading perspective.
Market News and Commentary
Markets definitely have begun to tire, in the short run, and we’ve now seen two straight days of pulling back materially from early highs. While there hasn’t been sufficient weakness to think a top is in, breadth has been subpar and could remain that way the rest of the week before a larger stallout. Overall, Upside looks limited this week, and targets lie between 2930-45 to take profits and expect at least a 1-2 week pullback, which very well could get jumpstarted following the FOMC meeting.
Emerging markets have shown better than average strength in recent days, with bounces in EEM, ILF, EWW, EWZ and others. In the short run, the declining DOllar has largely been responsible for the bounce in EM, but this looks to be nearing completion in the short run after its recent big selloff. US Dollar likely should bottom out in the next 1-2 days, and I expect China and Emerging markets to selloff and underperform.
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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.