S&P 500 Trading Outlook (2-3 Days): Leaning Bullish
The S&P 500 trend turned back to positive from areas of key trend line support from mid-November. This bodes well for the broader stock market and equities in general over the near-term.
The U.S. remains far stronger than other developed (global) stock markets, technically speaking. Looking at new all time highs yet again today.
Recap of the action: The S&P 500 drifted down to make-or-break short term support at 2645-50. Holding this price level was key for bulls… and that’s exactly what bulls did.
Price Analysis
I’m leaning bullish here with an eye on the uptrend line. If the trend line is breached, then stocks would like correct back to 2620.
Technical Thoughts
The ECB’s hawkishness with regards to growth certainly wasn’t reflected in their inflation forecast, and at 1.7% by 2020, Draghi still will have underachieved in his goals. It is questionable why the ECB remains in an easing mode with the US has turned towards tightening (while growth is similar). With US eyeing three rate hikes next year, Europe looks like a laggard with regards to being slow to normalize. As well, Europe’s stock markets are suffering ongoing underperformance, having underachieved with regards to keeping pace with the US.
Overall, Thursday’s setback in healthcare was larger than expected, but failed to do much meaningful damage. As well, the S&P 500 pulled back right to what should be key trend line support to buy dips. Financials have shown some further weakness and this could provide some backing and filling in this sector after having gotten overbought. The combination of both Financials and Semiconductor weakness should be a concern to investors given their weighting in the SPX (but not immediately).
Nothing in Thursday’s pullback seemed too extreme. And this is playing out today with U.S. equities at all-time highs.
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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.
