S&P 500 Trading Outlook: Â BULLISH
Yesterday’s pullback failed to do much technical damage, closing at, but not below prior days lows. As well, Demark counts are incomplete in the bullish month of December.
While another 2-3 days of weakness very well could happen, no trends have been broken, and anticipate that a push back higher can occur.
S&P 500 “daily” Chart Spotlight
Daily sell signals will not trigger for at least 3-5 days, so we could see a pause followed by another more higher to complete the sell signals.
TECHNICAL THOUGHTS
Sectors & Trading Insights: Utilities weakness looks to extend another 2-3 days, so this sector likely still underperforms and is a good source of near-term weakness for those looking for shorts this week. However, wise to close out shorts in Utilities by end of week, and look to slowly consider buying. Gold, Silver stocks doing well, while Steel continues to outperform. Materials stocks have ripped back to new highs. Financials are strong with rates on the rise and many Industrials still look to have upside.
Three things to note for yesterday’s session:
1. Â Bond yields began to turn higher globally, with yield curves steepening out to new weekly highs very quickly. For now, this move higher in Yields historically has coincided with a lift in stocks, as Financials have followed suit, while the yield-centric sectors have been lambasted. We definitely saw evidence of this yesterday with both Real estate and Utilities underperforming dramatically, and this trade could likely work all week long.
2. Â Technology began to show signs of weakening yet again, which could be a harbinger of some slowing that would affect markets starting next year. Whether or not the post close earnings out of MU and RHT will be strong enough to lead Semiconductors and Technology back higher sufficiently on Wednesday remains uncertain. But Tech remains the one traditional “risk-on” sector that has underperformed all sectors outside of Real Estate and Utilities over the last month, with returns of +1.76%. The NASDAQ has shown some evidence of weakening relatively vs S&P 500, and this will also have to be watched very carefully into next year.
3.  No material weakness occurred that would suggest any sort of larger Stock market selloff was underway. Prices barely got down to prior days lows in S&P 500 and Dow Industrials, while they were much weaker with NASDAQ, but yet breadth still was less than 2/1 negative. Much more evidence of stocks weakening is necessary before weighing in negative on the market in December.
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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.
