S&P 500 Index (3-5 Days): BULLISH
The short-term trend has changed to bullish as the S&P 500 Index INDEXSP: .INX rallied up and over 2940 earlier this morning ahead of the holiday weekend.
A move back to 3000 is possible into September before further weakness ensues. This view could change back to neutral if the S&P 500 can’t hold in and around 2940.
Given that this level held several times in the last month, and both Financials and Transports have achieved minor breakouts, it’s worth paying attention to and respecting in the short run.
Only a move below 2899 initially would be a negative development.
And a move under 2810 would be quite bearish, breaking the entire consolidation.
Market Commentary and Insights
Early morning strength has managed to exceed the highs of the range that has held since early August ahead of possible additional tariffs on September 1.
This does look to be an important and short-term bullish technical development as prices have stalled here on every occasion since early August. Breadth WAS a bit more encouraging yesterday, and momentum has turned back to bullish on daily charts which could lead to strength into early September before a reversal back lower. While non-technical in nature, it should be stressed that news regarding China seems to have taken on a more positive tone ahead of the weekend and any holding off on additional tariffs on Sept 1 would be significant in allowing sentiment to grow more positive during a seasonally weak time.
Key time zones for trend change to focus on include September 3, and then September 18, near the time of the FOMC. Short-term cycles indicate that both areas have importance.
Two important developments that ARE positive look to have transpired based on Thursday’s trading. Transports, which looked to be on the verge of a larger breakdown, reversed right away and traded up to break out above the minor downtrend from August. Second, Financials also managed to accomplish the exact same progress, surpassing what was thought to also be a key downtrend from the last few weeks.
Thus, while both sectors have been under pressure and have lagged substantially in recent weeks, this looks to be at least minor stabilization at a time when it was most needed. The one negative concerns the recent lagging in Technology over the last couple weeks, and despite Thursday’s strength, the start of additional underperformance in Tech will be important to monitor going into September.
Outside of sectors, the biggest development for Thursday concerned the US Dollar which managed to extend its recent breakout even further to new 2 year highs. (Note, the BBDXY, the Bloomberg Dollar index, which has far less exposure to the Euro than DXY by nearly half.. has made this breakout while the DXY has not) It’s thought that this dollar breakout likely could have near-term bearish implications for commodities and the Metals in particular, right as Treasury yields seem to be stabilizing. For now, Emerging markets remain under pressure and this looks to continue.
If you have an interest in seeing timely intra-day market updates on my private twitter feed, please follow @NewtonAdvisors. Also, feel free to send me an email at info@newtonadvisor.com regarding how my Technical work can add alpha to your portfolio management process.
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.
