U.S. Equities Trading Outlook: Upside Limited, Reversal Nearing

Mark Newton

S&P 500 Futures Trading Outlook (1-2 Days):  Upside should prove limited

A reversal is possible between Wednesday and early next week with an ideal time for next Mon/Tuesday.

I’m looking to reduce exposure and possibly short the S&P at 2810-15 (Nasdaq 100 ETF – QQQ – to likely top out between 176 to 178.50) into late this week.

Any movement under last week’s lows at 2763 for the S&P 500 and 173.18 for QQQ likely means markets have peaked.

S&P 500 Futures Trading Chart

s&p 500 futures trading chart june 13 price trend line analysis

Around The Equity Markets…

Similar to yesterday’s thinking, this rally is showing increasing signs of stalling out, and despite indices having made fractional gains, price wise on Tuesday, Yields pulled back hard into the close, and Financials were hit with a -0.50% lows, bringing XLF down to a multi-day low close.

Technology has shown evidence of stalling out in recent weeks as its rally has become far less robust with QQQ right near prior highs.   Demark counts suggest that peaks could come by early next week in QQQ, while some counts are ready as of Wednesday to sell into this rally.   One should consider lightening up on any further rally from Wednesday into Friday of this week, expecting that any further rally will come about on far lower breadth, participation and volume. Tuesday’s breadth ended up turning in NEGATIVE Advance/decline data by the close, which was telling . While Healthcare and Discretionary still look to push higher for 2-3 days near-term, and Technology might do the same into end of week, it’s wise to be on guard for evidence of stocks now reversing course with prices having pushed up into mid-month.

If this month’s pattern echoes that of the last few months, peaks in stocks mid-market might occur yet again, and given negative breadth, with two leading Generals of the SPX, Technology and Financials, starting to show evidence of weakening of late, one should be on alert for some stalling out.   As has been mentioned, seasonality and sentiment directly coincide with this thinking for the back half of June to be worse than the first two weeks.  While the Fed meeting itself might not serve as the catalyst, as a rate hike is expected, the guidance and the resulting move in the bond market needs to be watched carefully given that bond yields have largely been leading stocks in recent months.

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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.