While equities markets have been churning, they’ve also held up well. The S&P 500 Index (INDEXSP:.INX) is still above key price support and other internal indicators are doing well/okay.
Here is today’s S&P 500 futures outlook, with a look across the markets at internals and other trading variables.
S&P 500 Futures Outlook: (2-3 Days)  Bullish – Wednesday got right down to key 2167 support, but bounced hard following FOMC minutes into the close, giving few signals as to any impending downturn. The grinding uptrend which has gained a bit of ground since July 14 looks to be intact, and unless 2167 is breached on a close, it’s right to buy dips and expect 2189-91 to be tested and potentially taken out.
TECHNICAL THOUGHTS
Still difficult to have much of a strong directional opinion following Wednesday’s trading, and yet again, the FOMC minutes left many investors completely perplexed as to the right message. A split decision as to whether to hike rates generally translates into non-action given the seasonal weakness that can traditionally take markets lower during September/October. As many are well aware, the FOMC has become very much “Dow Dependent”, as opposed to strictly “Data Dependent”. IF the economic data is mixed regarding a rate hike while asset prices are resilient, several things need to happen in the next 30 days to justify any type of hike. Economic data needs to improve quickly, and the global equity rally from late June needs to continue uninterrupted. Third, the FOMC will need to take on a far more hawkish tone next week at Jackson Hole to “prepare” the market for any sort of hike, emphasizing the positives sufficiently while ignoring the lack of global growth.
At present,, Fed futures show roughly a 22% chance of rate hikes for the next meeting. Overall, it looks unlikely that anything will be done as multiple things need to “go right” before any type of hike can occur, even by a minor amount.   For now, this indecision is something which likely doesn’t coincide with a market top, but one which could keep equities slowly trudging higher, as many sit on the sidelines and scratch their heads.
One thing’s for certain.. Treasury yields and German bund yields certainly haven’t given much indication that broad-based economic strength is right around the corner. If anything, the trading range over the last month as part of this downtrend still suggests a probable break to the downside into the Fall period, unless economic data improves substantially, or a much more hawkish tone is adopted. Given that yields haven’t followed equities higher during their rise, any pullback in stocks during late August or September certainly wouldn’t cause an exodus out of Bonds. If anything, the flight to safety that’s driven USDJPY lower also would help Global bond yields continue lower as well, with breakdowns to new lows certainly possible.
For now, not much has changed with the outlook nor trend for Equities, for Bonds, or for the US Dollar and commodities, as both the US Equity market (indices) and bond market have been nearly unchanged for the last month. The Decline in the US Dollar is ongoing, while Crude’s gains continue, and Precious Metals seem to be basing for a final push higher post Jackson Hole, if and when “LACK” of any true hawkishness causes rates to plunge yet again and breakdown out of recent trading ranges. Bottom line, still difficult to be bearish on either stocks or bonds here, and expect 1-2% gains out of equities, while a larger breakdown in the US bond market.
S&P 500 Futures
S&P 500’s rise from key support at 2167 keeps this support intact as having significance, and the degree of the rally from yesterday’s lows suggests that very little technical damage has taken place as of yet which would prevent a move back to new highs. For now, 2190 remains important on the upside while Wednesday’s lows will serve to guide the pullbacks. Barring any break of either of these areas, the trend from July remains range-bound, yet upward sloping with a bullish bias.
Thanks for reading and good luck out there.
Twitter: Â @MarkNewtonCMT
The author may have a position 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.
