S&P 500 Trading Outlook (2-3 Days): BEARISH
I’m more bearish on the NASDAQ Composite (INDEXNASDAQ:.IXIC) than the S&P 500 (INDEXSP:.INX). In fact, the latter could still attempt one more high into early next week before failing.
BUT, even if that occurs, upside for the S&P 500 is limited to near 2485. On the downside, 2462 is key for the futures market as support. A close below that level should lead us all the way down to 2385-2400. See more Nasdaq thoughts below.
Technical Thoughts
Technology finally exhibited some much needed volatility by reversing gains sharply to the tune of about 1.5% before attempting a mild rally into the close. While the S&P 500 managed to recoup most of its early losses and did manage to recapture the key 2462 lows on Futures (2465 SPX cash), the trend looks uneasy as the month of July is coming to a close.
While it’s hard just yet to say the highs are in, it looks very much like the “shot across the bow” given the NASDAQ key reversal that took place.  Industrials weakness continued yesterday with Transportation stocks following through sharply to the downside, and this along with Technology’s reversal look to be important heading into end of month. While it looks a bit premature to be bearish when eyeing solely the S&P and DJIA based on price action alone, the NASDAQ Composite move definitely looks more bearish, and is in line with our weekly thoughts put out this past Monday.
Going forward, Thursday’s decline in Technology and the NASDAQ Composite in making a “Key Reversal” could be the important technical catalyst in leading the market lower into mid-August which would fit in with 20-week cyclical lows which are expected. For the S&P futures though, the same level stands for Friday, UNDER 2462 on a close would line up with some downside acceleration that could take S&P down to 2385-2400 into mid-August.
Outside of Equities, The US Dollar index once again gave some indication of trying to bottom out, with gains holding in the DXY, and exhibiting signs of bottoming vs the Euro and also Yen.
Commodities furthered their recent gains with CCI index leaping up above trendline resistance since February to the highest level since early June. Gold and Silver look to be at maximum areas to consider shorting and not much more in the way of gains can happen before these both continue up throughout August.  Near-term, however, I expect the Dollar might try to make a stand technically, and could make further gains in the metals difficult. But the line is drawn in the sand very clearly for both Bulls and Bears in the Metals based on the gains over the last month.
Chart(s) Spotlight: Nasdaq Composite and S&P 500
No matter how you slice it.  Thursday was a rough day for the NASDAQ, despite the attempted comeback. Prices still made a Key reversal and undercut the last few days lows, which happened on the NDX as well, along with XLK. This is the first “Shot across the bow” we’ve seen for Tech during this entire advance from July, not unlike what happened in Mid-June. If other sectors and indices begin to fall by the wayside, we have the makings of our first real period of volatility for the late Summer. At present, rallies should be used to sell, thinking a move down to 6200 is likely initially.
S&P 500 Chart
See analysis from earlier.
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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.
