U.S. Equities Short Term Technical Outlook – April 21

S&P 500 Futures: (2-3 Day Outlook)

Bullish up to 2369-71, with moves above this leading to a more robust move back to new highs. For now, the S&P 500 (INDEXSP:.INX) is at a tough juncture; prices have exceeded 2347, but yet remain in a mild downtrend from early March.

One can see another day of gains and then stalling out and minor give-back, or else a move straight higher. Either way, I think the prospects have improved and that movement under 2322 is unlikely right away.

S&P 500 Futures Chart

S&P futures broke out above 2347 and got very close to testing the resistance trendline that lies overhead from the initial peaks made back on March 1.  The late day pullback into Thursday’s close likely is an initial buying opportunity into Friday and could rise up to 2367-70 which should contain this move and allow for some backing and filling into the European elections over the weekend.   However, it’s thought that prices in the near future should move back above this trend and rally back to new highs given the choppiness and overlapping nature of this structure in the last two months.  Therefore, prices now lie at a difficult juncture, but this should be resolved in the near future.

Broader Market Technical Thoughts

Impressive ability to finally clear 2347, which was a minor positive and gives increasing amounts of confidence that this pattern from early March is just a consolidation pattern that should result in a breakout back to new highs.  We haven’t yet exceeded the key level just under 2370 that would give the green light in this regard, so prices remain at a tough area ahead of this weekend’s European elections.  A mild bounce up to 2367-70 looks likely and then a stalling out, and possible back track  (which would fit the scenario for Treasury yields to also hit resistance and pullback in a bottoming process.

Overall, while the short-term prognosis is for further gains up to trendline resistance from early March, it will take a definitive break of this level to suggest a larger rally can occur.  For now, S&P just hasn’t made enough progress, yet has shown sufficient signs of strength to likely ward off the chance for any sort of meaningful downturn given the uptick in momentum.

Heading into next week, it’s important to note the following:  While prices still lie in consolidation mode from two months ago  (AS of 4/21, S&P still lies just 2 points away from levels hit this time in February) the larger pattern remains quite bullish in its ability to have held up in resilient move after the 12% gains from Election time, with prices still only less than 2.5% from all-time highs.  Tech, industrials, Discretionary have all bounced, while Financials have also shown (thus far) the ability to have held key support and rallied off those lows.  The Dollar and yields should begin to turn up into May, yet it’s still tough to call bottoms in either, which likely means that any topping process in precious metals might take another few weeks. Heading into the weekend, any Fridayrally up to near 2365 or higher would warrant taking some trading profits and expecting a possible mild “backing and filling”  However, above 2370 warrants chasing this move, as it likely should advance back up over 2390 and could reach 2450 into mid-May before the next possible peak.

Get more of my ideas and daily trading insights over at Newton Advisor. Thanks for reading and good luck out there!

Twitter:  @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.