S&P 500 Chart Update
Ongoing resiliency suggests long exposure still correct, and premature to take too much off the table ahead of year-end. A move under 2652 is required before any real concern sets in.
Market Thoughts
Overall, stock prices still remain resilient, with positive price action out of Financials and Discretionary helping to boost the stock market indices yet again and reclaim some of the prior days minor weakness.
S&P 500 futures remain just 5-10 ticks from levels hit this time last week. This mild consolidation (given the lack of counter-trend sells) is likely to lead to a final rally back to new high territory to end the year on a positive note.
The problems regarding bullish sentiment, overbought conditions, cyclical concerns and monthly Demark counter-trend exhaustion on indices will likely resurface in January to be more of a “front-burner” issue. At present, given the lack of deterioration out of Technology and Financials lately (as Tech has begun to rally back), there’s been little to no real issue with regards to sector participation to be all that concerned about (as of yet). The Advance/Decline has pushed back to new high territory, and breadth and momentum have improved, with little to no negative divergence on weekly, nor monthly charts (which normally is key to witness to have intermediate-term concerns). For now, barring a pullback to new weekly lows in the stock market indices, it’s right to bet on further gains to finish out the year and use sharp gains to consider profit-taking for early next year. Happy holidays.
Trading Thoughts
Sticking with Energy longs, as XLE breakout likely to be followed by OIH and XOP if/when Crude breaks out itself which looks increasingly likely.
Financials still look to have upside and yesterday’s bullish pattern in KBE should still lead this group higher, which in turn should help support the S&P a bit longer, up to new high territory
Utilities weakness now down to levels where its right to cover shorts from a trading perspective and await an upcoming bounce. Aggressive traders may want to look at Utilities while long-term investors should hold out due to structural deterioration.
Staying long Gold, Silver stocks while favoring Steel stocks as SLX starts to move to multi-week/month highs.
Mild flattening in yield curve likely over next 3-5 days which can be used to initiate Curve Steepeners in 2s/10s curve yet again.
Thanks for reading and happy holidays.
Twitter: @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.
