S&P 500 Trading Outlook (2-3 Days): BULLISH
The S&P 500 rallied up to new highs and there’s no evidence of prices peaking here just yet.
Key Levels To Watch
Expect the rally to zig zag up to 2677-8 (S&P 500 futures) over the near-term, with additional gains likely if we see another breadth/momentum surge.
On the flip side, a move under 2645 would be the first meaningful sign of daily weakness.
Technical Thoughts
With the FOMC decision due today at 2pm and an interest rate hike nearly 100% built into the market, a hike today looks like a near certainty (anything else would spook the market). However, most will be eagerly listening for any evidence as to how the FOMC might weigh in on tax implications and how that might affect the number of rate hikes for 2018.
Treasury yields backed up pretty sharply on Tuesday (and once again this morning). Meanwhile, the Financials (XLF) surged back to new highs. Note that XLF TD signals are not confirming this move and looking increasingly like they’ll be stopped out. This is worth watching to see how this plays out.
The real concern with three weeks left in the year is the lack of Technology strength and the inability of the Semiconductor Index (SOX) to recoup more of the deterioration from mid-November. Many stocks like Nvidia (NVDA) and Micron ()MU that have led within the Semi space this year are now stalling out and turning lower (to multi-day lows). Both of these are on my “short” list, thinking that additional near-term weakness is likely.
Outside of Technology, the Russell 2000 itself was down in yesterday’s session, and the ratio of small-caps to S&P 500 seems to be near important support that needs to hold, or else would give way to further deterioration which likely would carry over into the new year. Overall, S&P 500 and Dow Industrials remain on good footing, yet its the NASDAQ and Technology which deserve the close eye over the next few weeks. The failure for NASDAQ to push higher and join the others at new highs with more of a meaningful bounce in Tech would likely cause a real headwind for stocks in early 2018.
Twitter: Â @MarkNewtonCMT
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.
