S&P 500 Trading Update (Futures):Â (2-3 Days – Bullish)
Futures prices have managed to move back to new intra-day highs. In fact, by the end of day Thursday, the Dow Jones Industrial Average (INDEXDJX:.DJI) managed to join the S&P 500 Index (INDEXSP:.INX), and Nasdaq Composite (INDEXNASDAQ:.IXIC) at new highs all in unison for the first time since 1999. Rallies up to 2200 and slightly over look possible on S&P 500 futures. For now, Thursday’s move to new highs was constructive and the major stock market indices will look to close out the week near their highs. It’s wise to remain on watch for a reversal, though.
Technical Thoughts & Market Notes
As noted, it was a historic day for the major stock market indices. The big 3 managed to move back to new all-time highs for the first time since 1999, something that many would have thought implausible a few months ago. Market breadth was only moderately positive, while Energy and Consumer Discretionary managed to lead all other sectors. Consumer Staples was the lone sector to finish down on the day. Treasury yields shot up along with equities throughout the session, yet they still have some work cut out for them. Some additional constructive price movement will need to occur before rates can begin trending steadily higher.
Overall, it’s worth reiterating that only US Equities have really broken out to new all-time high territory. Treasury yields remain very much range-bound within their downtrend. European equities still lie roughly 5 percent away from downtrend line resistance projected from the peaks made last Spring. And most European stock market indices, with the exception of the German DAX, are not in uptrends. Given the historical pattern of much of the world having moved in unison in the last few decades, having peaked in 2000, 2007 and bottomed out in 2003, 2009, seeing such a massive divergence is worth noting. At some point we’re likely to see some mean reversion. While the European and Asian stock market indices have shown relative strength recently, they remain well off all-time highs. And in the case of EuroSTOXX 50, this index remains more than 40% off its all-time highs.
Small-caps and Transports are also worth mentioning as two laggard groups which are nowhere near all-time high territory. That said, both have shown some strength recently. Momentum and breadth, at present, remain in good shape. The Defensive sectors, meanwhile, like Utilities and Consumer Staples, have shown meaningful underperformance, which was exactly the opposite of what occurred back in late February-April.
For now, the market rally continues. The positives of Bullish sector participation, positive market breadth, and momentum are bigger “PLUSES” than the negatives of seasonality and a growing level of complacency. These latter points are minor concerns, but until they begin to cause price to turn down, its proper to stick with the trend. If counter-trend indicators line up in the next 2-3 weeks, one could make a stronger argument towards fading this move. For now, it clearly still looks a bit premature.
CHART OF THE DAY – MSCI World Ex USA
Instead of concentrating on how “great” the US stock market indices are, it’s worthwhile noticing how poor the rest of the world is in comparison. This can be seen after just a quick glance at the MSCI World Index chart EX USA. Globally, equities have rallied, but remain only up near April highs. This is a far cry from new all-time high territory. Most of the world peaked in 2014 right when Small-caps and Crude oil began to turn down with a vengeance. For now, the near-term trend is positive for this bounce, but the MSCI Global EX-USA has barely recouped 38% of the decline since 2014.
Thanks for reading.
Twitter: Â @MarkNewtonCMT
The author may have a position 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.
