S&P 500 Trading Outlook (2-3 Days):Â Â Above 2560 keeps trend positive as early pullback attempts failed.
While upside might prove limited for the S&P 500 (INDEXSP:.INX), the bias still appears to upward, as declines have failed thus far to gain any traction. But the anniversary of last year’s election lows is nearing…
S&P 500 futures could reach 2585 (Tuesday’s highs) with a move above this targeting 2590-2592 into early next week before pulling back. A seasonal turning point could come as early as next week, given the anniversary (and prominence) of last year’s lows.
The S&P 500 has traded quite erratically of late, but none of this has translated into any real weakness for the major stock market indices. And repeated pullback attempts have failed thus far.  As an example, Wednesday’s breakout attempt reversed course and sold all the way down to near unchanged for the day… and while Thursday morning saw follow through selling, the S&P 500 managed to recoup those early losses to close positive on the day (while holding the key 2560 area).
Given the combination of an above-average result out of Financials Sector (NYSEARCA:XLF) and strength in Apple (NASDAQ:AAPL) earnings and price action, the bias of S&P 500 is still be higher into early next week (which will mark the anniversary of last year’s Election lows).
TECHNICAL THOUGHTS
Thursday’s early pullback managed to hold where it needed to support wise, and by end of day, prices had moved back up to near unchanged, keeping a mildly positive bias intact. While breadth and momentum deterioration are a concern heading into the anniversary of last year’s most important turn, we’ll need to see movement down under 2560 at a minimum to have concern.
Overall, the positive forces of Financials (XLF) closing up to multi-day highs along with Apple’s (AAPL) after hours rally are both positives that should help Financials and Technology to both show additional strength today and potentially into early next week.  One should be on the watch for signs of reversals, particularly in Technology, whereas Financials looks to have potentially another few days of gains given Thursday’s move. While the Financials move certainly doesn’t line up with what normally might be expected given the yield curve implosion and Treasury yield breakdown, this market has been anything but normal for some time now.
The key developments for Thursday focused on Aerospace and Defense lurching higher in a way that helped Industrials, while Homebuilders looked to have peaked out given further details of the tax bill. Outside of these, we saw Financials make a definitive move higher, which might have some further upside given the close at new multi-day highs.  Additionally, Treasury yields broke down, both here and abroad, with evidence of UK Gilt yields also cracking. Overall, this should prove to be an eventual headwind for the Financials rally. For now, Further equity strength along with Treasury rallies in unison can’t be ruled out.
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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.
