S&P 500 Technical Market Update: Treasury Yields Surge!

Despite the degree of near-term overbought conditions, it’s tough calling for any sort of meaningful snapback in the short run. The S&P 500 Index (INDEXSP:.INX) may be setting up for a retest of Thursday’s highs around 2180, but we’ll need Thursday’s lows to hold.

A move to new weekly highs would likely bring a retest of the August highs. And this could come on the heels of a sharp rally in treasury yields.

That said, there is plenty of uncertainty over the very near-term for stocks. Dips to 2122 and/or 2106 on S&P 500 futures are possible into next week, but for now, additional upside still looks likely before any consolidation.  2147, Thursday’s lows, are important in this regard for the next 1-2 trading days.


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Technical Market Thoughts

Near-term upside could prove limited given the degree to which markets have lifted in recent days, though 2183-5 and 2196 both remain viable targets into mid-next week. From midnight Tuesday until mid-day Thursday, S&P 500 futures surged more than 8%, coming within 4 ticks of August highs. The Dow Jones Industrial Average along with Dow Jones Transportation Average have both broken out. Yet, at the same time, the Nasdaq has shown some evidence of not cooperating, with the Tech sector proving much weaker than what might be expected.

While market breadth has been weaker than normal in the last couple days, with yesterday’s Advance decline even showing more Down stocks than Up, the action in the financials and industrials has been quite impressive. Both broke out to multi-month and year highs, exceeding the entire base in place for both throughout much of 2016.

Meanwhile treasury yields have vaulted up higher in a manner that is quite bullish for further yield gains into end of year. That said, near-term yield gains have made daily charts also very stretched, and yields will require consolidation.  Both 10 and 30 year Treasury yields broke out above meaningful resistance this past week, which was behind much of the upward outperformance in FInancials.

S&P 500 Futures Chart

s&p 500 futures emini trading chart technical support november 11

The S&P’s gains now have stalled out after the dramatic surge, but the resulting pullback thus far isn’t all that meaningful, and one can make a good technical case for another stab at 2185, or even 2196 into early next week before any selloff.  Thursday’s weakness down to 2147 makes this area important if retested as support.

Thanks for reading and have a good weekend.


Twitter:  @MarkNewtonCMT

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.