S&P 500 Trading Outlook (2-3 Days): BEARISH
The S&P 500 (INDEXSP:.INX) declined sharply yesterday but managed to hold right where it needed to. It literally came within 1 point of 2562 on the Futures market before rallying back to the upside. I’ve been highlighting the importance of 2562 all week.
Any rally attempt Friday should present shorting opportunities. I believe that a move down under 2562 should get underway next week as a deeper decline / pullback takes shape.
In case you missed it, here’s a review of my “7 Market Concerns“.
TECHNICAL THOUGHTS
Finally some evidence of pressure on the broader stock market indices with mounting concerns of structural health. The S&P 500 touched down near 2562 before rallying back nearly 20 ticks. While this might seem positive to the Bulls who talk about “Dips always being bought”, markets still showed severe weakness in Industrials which took another leg down, while Technology moved to a new daily low. Transports finished lower by more than 1%.
Also notable is the action in the High Yield market. We’ve been pointing this way for some time. It continues to show some unsettling signs of plunging in the High yield ETF (NYSEARCA:JNK). While issuance has not yet become a problem, signs of this slowing would be a bigger damper for Stocks most likely than just a mildly lower JNK price. But credit spreads have begun to widen out and are important to note as such.
Most of Europe had taken the lead in selling, being down seven straight days, and Thursday’s losses were roughly 1%, while Bunds actually sold off during the day to tighten the spread to Treasuries. USDJPY showed some evidence of selling off to break minor trends and the DXY was mildly weaker as precious metals rebounded. Overall, it’s doubtful that Thursday’s recovery managed to save indices from turning down, as the momentum and breadth remain depressed and moving lower and various sector weakness within transports, industrials, Financials has now been joined by Technology which showed its first sign of turning down. While a stable market is possible into next Monday, the trend should begin to demonstrate more signs of weakening next week.
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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.
