S&P 500 Futures: (near-term outlook)  It’s still tough to make much of this minor market pullback as being all that bearish to the larger trend for stocks. Recent positive breakouts in the Financials, coupled with an uptick in bearishness, are putting a floor under the stock market. The pattern continues to be neutral but the larger trend is higher until proven otherwise. Key futures support resides at 2157; below that is 2141.
Below are a few things to keep in mind over the days ahead.
TECHNICAL MARKET THOUGHTS
Stock Market prices have been resilient, rallying back from each dip. S&P 500 futures dipped below 2157 briefly this morning but the S&P 500 (INDEXSP:.INX) rallied back again once more. Some technical damage was done, so watch this morning’s lows. Bonds and stocks have been falling together and yesterday the US Dollar stalled out. Crude oil has provided quite a bit of volatility, falling over 3.5% yesterday.
Overall, stocks and bonds remain range-bound ahead of Friday’s Jobs report. But volatility is not likely to remain as subdued in September. It will be important to monitor for signs of trends starting to shift. Following yesterday’s minor decline, there remains no real evidence that this neutral trend in stocks has shifted whatsoever.  Note: charts created on Bloomberg
Sector-wise, August provided a much needed change for the Financials and Technology stocks. As detailed here, both of these sector’s led with monthly gains of 3.57% and 1.84% respectively. Utilities and Telecomm, the two market performance leaders for 2016 thus far, both underperformed substantially for the month of August. Given September’s bearish seasonal tendencies, this pullback in the Defensive groups likely has gotten a bit overdone in the near-term. Yet, most charts of Utilities, Staples, REITS have all broken key trendlines on absolute charts. These will need to be regained to have promise of these groups showing any kind of material strength again.
As mentioned yesterday, the main technical moves were largely made Tuesday, with the breakdown in Commodities and breakout in the Financials sector. European banks furthered the move in US Financials on Wednesday with their own sharp advance, which has improved the near-term technical trend, but similar to XLF, KBE, has now gotten near-term overbought ahead of a very important Economic number Friday. Global sovereign yields have largely stalled out in the short run, and the same can be said about the US Dollar index after several days of sharp gains. Friday will go along way towards confirming some of the recent hawkishness regarding a possible hike, and until we have that confirmation, and/or any type of evidence of equities breaking out of , or down from the recent range, along with Treasuries, it’s difficult to have much conviction in the near-term trend. However, given the resilience in Tech and Financials, it remains prudent to stick with the prevailing uptrend in equities from June and February until proven otherwise.
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The NASDAQ Composite (INDEXNASDAQ:.IXIC) managed to hold where it needed to and bounce back over the last couple days lows. Technically, until we see a meaningful break that holds, its right to buy dips and expect bounces into and post NFP this Friday given the positive price action in Financials, and the jump in uncertainty, caused by the anticipation of this week’s Jobs report and the implications for this month’s FOMC meeting.  Breaks below this week’s lows would argue for a negative followthrough which could reach August lows. For now, until this happens, it remains premature to bet against stocks.
Thanks for reading.
Twitter: Â @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.
