Market Observations 6/26
A very nice week turned in by the indices last week SPY +6.4% QQQ +8.6% IWM +6.8%. I think the main question on equity investors minds is has the market put in a bottom? In short, I think more time and levels have to be retaken before we can make that conclusion. Let’s look at the S&P technicals in both the weekly and daily chart to provide some insights.
$ES_F S&P futures Daily & Weekly chart observations
Price remains below the 50d and 200d MA and in an downtrend (Daily chart)
Price is above the short term 5d EMA and 20d EMA (Daily chart)
Price has regained the June Value Area (Daily chart)
support level to watch 3890 Bottom of June Value Area (Daily chart)
Weekly candle is a bullish engulfing candle and a Reversal from prior week
Overhead resistance on Weekly chart is 4071.5 which is 4% from Friday’s close
Conclusion: Watch the levels! For me, for the bottom to be in, price needs to reclaim that 4017.5 bottom of this year’s Value Area & hold (Weekly chart) and price needs to hold the bottom of this month’s Value Area, 3890. Watching these levels takes the emotion out of the equation and helps provide a plan. In addition, I like where sentiment levels have gotten to and breadth (NYSI NASI) has improved (see below). In conclusion, the market is improving and will monitor for changes in levels and trend as the indices are still in downtrends.
$ES_F Daily Chart
$ES_F Weekly Chart
Notable Indicators & Sentiment & Economics
The Fed and short term interest rates
currently, Fed Fund Futures are implying that the Fed will raise interest rates ~ 68bps, so almost a 75bps hike is priced into the market for the next meeting on 7/27.
We know that Fed will be closely watching the next inflation data & we get the next major reading on Thursday with the PCE Deflator. This data point will be important in my opinion. A reading below expectations of +0.7% could spur more short covering and outright buying in Equities as they Fed may tone down the rate and size of interest rate hike if inflation cools.
Breadth
We have a bullish divergence playing out here both the NYSE and Nasdaq Advance / Decline lines did not make a new low while the indices did back in Mid June. Also, both NYSE and NASI lines turned back up on Friday and NASI crossed over its 10d MA. I tend to use the NYSE and NASI to help define what direction momentum (advancing vs declining stocks in each are doing) is swinging.
S&P futures positioning
speculators are now net short (1st chart)
asset managers are back to ‘15-’16 levels (2nd chart)
Sentiment
TTG last week’s watchlist
every week TTG provides a watchlist based on technicals & momentum. This is always a starting point for the week and no guarantee of future performance, just names I want to keep an eye on to start week
this week’s watchlist will be provided to TTG members Sunday night + Macro Video
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