Headlines and Open Positions:
The US economic calendar has dominated the news wires in regard to equity indices valuations, with a stream of data hitting the wires recently that confirm the business cycle is still unable to move out of the trough phase and into expansion. Recent main stream media focus has been on low-volume equity consolidation and weak year-end potential. Fundamentals remain very questionable, especially as Q1 earnings season wraps up and question begin as to whether the Federal Reserve will instigate another round of quantitative easing programs.
Trade desk signals highlighted the potential in a weekly chart close below 1330 on the S&P 500 (1319), below 7150 on the German Dax (7160), and below 9500 on the Japanese Nikkei (9560), as being pivotal for equity outlooks going into June. These areas were all broken recently, and created volatility as questions were raised on valuations and the potential for sustained moves that would hold their course for more than one trading session at a time.
SPY (132.30), the exchange traded fund (ETF) that tracks S&P500 momentum will very likely test support at 131.90 in Wall Street trade on Thursday. Expectancy is for the sideways choppiness to continue, in-line with global equity trade that has found fair value. There is very little support if 131.00 breaks on SPY, which will draw in targets of 129.50 and 127.50 if momentum builds in global equity selling.
Breaks above 1340 on S&P 500 and above 133.00 on SPY, which have been highlighted as major resistance areas, now look to be a long way off. Any open long-equity positions should be closely monitored while recent price action is absorbed. The next price action break of note will carry a lot of pent-up momentum, but as yet there have not been any confirmed signals indicating that markets are ready to move and hold.
S&P 500 Price Action:
Strong buying activity was seen at 1330 on S&P 500 trade in April and May. The market has moved lower and taken out this major swing point area, and will now be closely monitored. Market alerts and updates will be sent to subscribers when price action moves look to be sustainable.
Main S&P500 support: 1295. Main S&P500 resistance: 1340.
Daily trading range on S&P 500 is 16 points, which is above the historical norm and indicates that volatility is increasing, in low-volume markets.
ETF Price Action:
SPY trade ran into a wall of resistance in April and May at 134.00, which will now be very difficult to break. The trade desk will pay close attention to price action as the week unfolds, and expects a lot of price gaps to form between each session open and close. Volatility will build if the pattern of Asian and European trade moving S&P 500 futures valuations overnight continues.
Main SPY support: 131.00. Main SPY resistance: 134.00.
S&P 500 100-day Simple Moving Average (NYSE:SMA) is at 1312. S&P 500 price action has a 36-month 75% correlation to crude oil moves, and a 90% correlation to the aussie (Aud/Usd) currency pair.
The last clear-cut equity signal to form and complete was issued to clients with a break lower on the S&P 500 from the 1333 area, which has now completed its course. Traders have seen momentum build in global market equity selling.
Sentiment and outlook towards equity trade remains weak, and favors consolidation as month-end book balancing takes place. Price action will likely a continue the choppy and volatile intra-day patterns seen in equity and ETF prices during the month of May. Traders committing to long equity-based trades at these levels need to use caution in trade size levels.
The main US ETF’s that track technology (NYSEARCA:XLK) (25.80), energy (NYSEARCA:XLE) (75.70), semi-conductors (NYSEARCA:SMH) (35.15), financials (NYSEARCA:XLF) (15.50), and emerging markets (NYSEARCA:EEM)(46.60), show little indication that a move higher will be easy to hold. All sectors are in a mid-term short cycle with no buying signals in sight.
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