S&P 500 Trading Outlook (3-5 Days): Bullish
I am bullish on stocks barring a close under 2877. My near-term upside target is 2950. However, a move above 2950 will likely drive the S&P 500 to 3040-70
A few interesting developments as markets near the end of April. Financials have started to turn up in earnest, with the 2s/10s/ Yield curve breaking out to new steepening highs of the year. Small-caps have also performed well, with IWM breaking out above a fairly well defined base.
Meanwhile, the US Dollar’s rally has thwarted some of the progress in the commodities space and Emerging markets while many of the Metals have turned up anyhow coinciding with the Treasury rally. Overall, in all likelihood, April will turn out to be a stellar month, with gains of more than 3%, marking the fourth straight months of gains, at a time when sentiment largely still hasn’t totally embraced this rally.Â
Concerns of breadth deterioration, momentum waning a bit, and some violent sector rotation largely have had little to no effect in equities as of now. Demark exhaustion remains premature on daily and weekly charts. A few minor cycles hit near 5/1-2, but getting past this likely would result in further gains up to 5/16-7, which is an important area for trend change.
The concerns of recent Chinese deterioration along with Semiconductor weakness at a time when Google (GOOGL) looks to have whiffed on earnings, sending the stock down 3% after hours, while Samsung is showing weakness abroad this morning, could turn out to be problematic.
Yet, these look to be largely counter-balanced by Healthcare strength and Small-cap relative strength. So for now a very strange and different market than that of January-March.
Selectivity is key and it’s thought that upside for the S&P 500 should be limited to near 3040-75, but yet at present, many are sounding a similar tune, and are skeptical that May can replicate what’s been seen thus far this year. The movement in Financials and Tech should prove important, and for now both groups have been resilient of late.
Chart Spotlight: China
China looks to be slowly but surely giving wayat a time of Dollar strength and we’ve seen 6 of the last 7 days lower, which looks to pullback to test this uptrend from last year before any stabilization occurs. In the short run, the US Dollar breakout looks to have further upside, and it’s likely that China’s Shanghai Composite also weakens further, which might create some buying opportunities if this reaches 2900.
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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.
