U.S. Equities: Short-Term Technical Indicators Point Higher Yet

S&P 500 Futures

Trading Outlook (2-3 Days):  Bullish

It still looks right to give the bulls the benefit of the doubt, as prices closed up above support at 2365 and now HOURLY TD COMBO buys are present. While there are notable warning signs of breadth divergence & more stocks hitting new lows than highs, it still looks MORE likely in the short run that prices move higher to get above 2400. An hourly close under 2361 as of Wednesday’s trading could drive a bit more weakness, and should serve as a stop to half longs, with 2349 on the balance.

The S&P 500 (INDEXSP:.INX) fell back into the consolidation by Tuesday’s close by a fractional amount, and did undercut Monday’s lows, despite not breaking 2365 in March futures.  For now, it still looks premature to call for a larger pullback. Sectors like Financials, Technology, Industrials, and Discretionary are still holding up well and are important reasons to support further resiliency. Additionally, Treasury yields attempting to breakout, as mentioned previously, should help Financials (NYSEARCA:XLF) make further headway.

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S&P 500 Futures Chart (through March 7)



Tuesday’s selling proved mild, and by end of day, finished above support at 2365 that would have otherwise signaled the start of perhaps a larger pullback to 2349-50 area. At present, it’s still right to give the Bulls the benefit of the Doubt. Stocks like Apple, Inc. (NASDAQ:AAPL) which carry huge weight in many indices continue to look quite strong technically, and Treasury yields look to be breaking out above important trendline resistance.  Both of these have positive implications for the Technology and Financials sectors respectively. Until we see some evidence of this changing (and Treasury auctions might reverse this breakout.. we’ll see) it pays to think further upside can happen into the upcoming FOMC meeting.

However, there was some evidence of stalling out in one sector that does have moderate implications for stocks. Healthcare was the one sector that showed a large reversal of trend Tuesday given the GOP’s Healthcare bill to replace Obamacare. The Health Care ETF (NYSEARCA:XLV) fell to multi-day lows by end of day, violating the steep uptrend after prices had reached near-term resistance at $76 near last August’s highs.  Stocks like ESRX, ALXN, MNK, REGN, UHS, MCK and EVHC all fell more than 2% and many still look to extend losses on Wednesday given prices in many cases finishing at their lows.

Finally, the Precious Metals complex has been under substantial pressure of late with meaningful reversals of trend for Copper, Steel, Iron Ore and the Precious metals. Gold slipped down under 1217 today and has been persistently weak given the uptrend in Treasury yields combined with US Dollar strength.  This looks likely to continue in the short run, and most would be wise to avoid the Metals as yields and the US Dollar trend higher.

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Twitter:  @MarkNewtonCMT

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