S&P 500 Trading Outlook (3-5 Days): Bullish above 2900/Bearish below
The trend has improved on the recent move back up over 2895 (2900 for Dec Futures).
While stock market breadth is a concern and the Financials have struggled, trends will be positive OVER 2900 and negative UNDER.
Violations of 2900 should lead to 2865, while strong overhead resistance lies near former peaks at 2917. Be watchful for signs of reversal given mid-month tendencies, particularly in the bearish month of September.
TECHNICAL MARKET THOUGHTS
The S&P has largely held above 2900 for the last three weeks. This area becomes key to hold on any retests and given the seasonally bearish part of September that lies directly ahead of us where most Mid-term Election Septembers show strength in the first half of the month and then weakness in the back-half, it’s proper not to get too excited about a one-day move in S&P.
A couple reasons for concern revolve around the lack of performance from Financials which hit multi-day lows on Wednesday and have been this past week’s worst performing sector (while Tech was also down for the last week heading into yesterday) Daily momentum indicators like MACD are still negative and breadth peaked out in June (See Summation chart below) However, the strength in US indices is impressive compared to the rest of the world and we’ll need to see this start to deteriorate to really care all that much. For now, shorts should be placed in Europe as bounces have not gotten back the damage that’s been done.
China meanwhile looks set to bounce given the Dollar downturn in recent days, and Emerging markets have begun to bounce with Turkey’s decision to hike rates. This big surge yesterday in EM currencies is temporarily helpful to the recent pullback in the Emerging markets and should drive these markets higher for a bounce (which would turn into a larger rally if and when the US Dollar starts a larger decline. For now, a bounce is likely.
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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.