S&P 500 Futures Struggle as Bearish Sentiment Rises
Inciting the holiday shortened week, Tom Aspray (@TomAspray) reported that for U.S. equities it will be a struggle as the end of the current one was recorded in S&P 500 futures trading near its close from last week as per bottom off South Korea’s t[...]
On Friday, the stock market had a rebound while the 10 Year T-Note yield fell below June lows. As we pointed out last week (see chart), the technical indicators did suggest that yields had topped out. Earlier in the year, higher yields pressured the stock market but so far lower yields and lower crude have not had much of an impact.
I was hoping for a more positive development last week, but the market now needs to prove itself in the coming week. The strong finish last Friday wasn't enough to turn things around and make it positive. As discussed below, it will take several days of strong advance/decline numbers and a move in the averages above recent highs before that happens.
The Nasdaq 100 fell 4.3%, which was almost twice the 2.2% drop in the S&P 500. The iShares Russell 2000 ETF (IWM IWM ) lost 2.1%, but it has started to perform better technically in recent weeks
The Dow Jones Utility Average was the only positive market, gaining 4.1%, likely in response to falling yields which made its stocks more attractive. The other Dow Averages were down for the week as the Dow Jones Transportation fell 1.9% and the Dow Jones Industrial Average lost 1.3%.
The Dow Utility Average is the only index that has a positive return YTD. The SPDR Gold Shares are down 1.5% YTD, while the other indexes are in negative territory.
Last week I discussed the somewhat rare bullish divergence in the weekly Nasdaq 100 Advance/Decline Line where data is only available since early in the bull market. Last week there were more declining than advancing stocks on the NasInput. That means that A/D line was lower as it dropped below its WMA but bullish divergence is still intact. If this week's numbers are negative while positive numbers are needed to increase chances of a near term low, then that could change.
The Spyder Trust (SPY PY ) rose by over 1% on Friday but it closed below the July pivot at $385.62 and the 20 day EMA, which is a bit lower. There's more important resistance in the area of $393.16, which was last Tuesday's high. The daily downtrend line a and monthly R1 are in the area of $409.07. Support is at $363.01 and daily
The S&P 500 A/D line is in a short-term uptrend, as seen on line c. The index closed above its WMA on Friday. A strong move above the resistance at line b would indicate a stronger rally. If the index drops below last week's lows, it will show that the stock market will continue to decline.
Last week, four sectors were higher led by the Utilities Sector Select (XLU XLU ) which rose 4.1%. The Energy Select (XLE XLE ) and Consumer Staples Select (XLP XLP ) also had gains of 1.4% and 0.5%, respectively
At the start of the week, XLV was one of the sector ETFs that interested me and on Friday it closed at $129.68, which was just below a new QPivot at $130.46 and a weekly close above it would be a positive sign for the intermediate trend. The is further chart resistance at $133.47, which is where prices ended in May.
The weekly relative performance (RS) has surged to further new highs after overcoming resistance, line a, early in the year. This was a sign that it was a market leader, but it is important to remember that the RS analysis only tells you how an ETF or stock is performing against the SPX. Positive RS analysis does not mean that market will not decline. For example, over the past three months, XLV was down 5.8% while $SPX was down 15.9%.
The on-balance-volume (OBV) dropped below support, line c, in early MA and is still below its declining WMA. The close was well above the new monthly pivot at $126.57 and the rising 20 day EMA at $127.03 which should provide support. The daily indicators closed the week positive.
The drop in Bitcoin BTC (BTC) has caused widespread financial pain in the past few months as it fell to a low of $17,640 on June 18th. In early May I was focusing on the continuation pattern, line a and b, which I thought was just a pause in the downtInput. I commented that "a weekly close below $34,349 would indicate that the downtrend had resumed." That occurred on May 10th and volume was heavy.
BTC fell to a low of $25,800 and then stayed flat until mid-June when another wave of selling occurred. The daily MACD-His started to deteriorate in early June and turned negative as BTC was dropping again. While the daily is positive but the weekly MACD-His is negative, so the recent sideways pattern does not yet suggest that a bottom has been reached. I will try to do a full review of BTC before mid-July
On Twitter follow me for a Tuesday update on the stock market after the long weekend as futures market action will be important going into Tuesdays open.