Stock Market Resilient As Bulls Push Higher This Week

Mark Newton

S&P 500 Index Trading (3-5 Days):  Bullish

The trend is still showing very little evidence of any reversal and yesterday’s move above last 3 days highs is a minor positive for continued push up into early next week.

Expect a stallout and minor reversal on the S&P 500 NYSEARCA: SPY in the next 3-5 trading days.

The S&P 500 move surpassed the minor 3 day range, which is a mild positive and looks to allow for some brief overthrow above the 3095 level discussed in recent days.

Exhaustion counts suggest another 1-4 trading days, which would take the equity markets into next week before a reversal.

Stock market breadth is fairly tepid to say the least in the short run and despite being at all time highs, has been flat over the last few days. Until 3063 is violated, it’s going to be right to stay long into early next week, expecting a final pullback in implied volatlity which should offer opportunities to buy Vol next week.

The main development for yesterday had little to do with Equities, but with Treasury yields, as the 10-year yield exceeded September’s 1.90%, which should pave the way for a push above 2.00% in the days/weeks ahead. This enabled yields to break out of the entire downtrend from last November’s peaks, and should be bullish for Financials near-term while bearish for Utilities and REITS.

The financials (XLF) now lie only <1% from early 2018 peaks, and this area near 30.50 should be strong resistance heading into next week. For now, it’s right to expect a bit more upside in this group while avoiding the Defensives.

The Transports pushed up to the highest levels since April, which was constructive yesterday after some severe lagging in this group. Meanwhile the move in rates and the Dollar bouncing seemed to spook precious metals and we saw a big breakdown in Gold, silver in a way that would cause further near-term weakness, though would set up for better buying opportunities for those with intermediate-term time horizons. Overall, Yields and Dollar are pushing higher, and the Metals likely 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.