BEARISH MID-TO-LONGER-TERM (Weeks-To-3Months+): We are currently experiencing a technical bounce in North American markets. If the S&P 500 breaks back below 1,880-1,870 (a key support floor), and if the Crude Oil (WTI) reverses back below $30 aggressively. This market has more downside risks than upside potential in the mid-to-longer-term.
BULLISH SHORT TERM (Days-To-Weeks): Entering this week higher risk long side positions were on play with the deeply oversold technical bounce that started January 20th, 2016. S&P 500 (SPY), Nasdaq (QQQ), Russell 2K (IWM), Int’l Developed (EFA), Emerging Markets (EEM) and TSX (XIC).
We remain in HOLD mode on these positions into the open, looking for a momentum break above 1,928-1,921 on the S&P 500 to signal potential adds; however, a breakdown below 1,880-1,870 will likely stop us out or provide those without stops higher odds to de-risk.
Pre-Market Action: We are seeing a mild form Risk off tone to the markets into the open.
S&P 500: Pre-market the S&P 500 is down -0.5% (support on SPY of $189.50 is holding and resistance of $190.33 from last Friday is holding pre-market = range-bound trade intraday);
DOW: -0.5% Down moving in tandem but may outperform as traders look for safer stocks on a down day. MCD up pre-market with a solid earnings beat.
NASDAQ: Nasdaq is moving in tandem with the S&P 500 -0.41%
RUSSELL: Russell is under-performing down -0.8%.
TSX: The mild weakening (profit-taking) within the commodity complex coupled with the weak-form risk-off tone to equities globally implies the TSX under-performs the S&P 500 into the open
BONDS (TLT): TLT (US Treasuries) +0.6% pre-market catching a mild bid but traders are not running for the hills to buy defense yet.
OIL: Currency flows support a mild weakening in commodities persisting in today’s trade; however, this likely turns on a dime Jan 27th, 2016 when Yellen more likely kicks the can down the road on the next US Rate hike (weakening the USD and supporting a bid to commodities, at least technically).
GOLD: Gold +1%; remember these defensive assets are dislocated and relatively expensive.
VIX: Volatility pre-market is mildly stronger +1% but clearly in swing-high formation on the daily charts (supportive to the bounce continuing over the week).
The market is still configured for the risk-on bounce that started on Jan 20th, 2016 to continue, however jitters likely persist until we hear from Yellen on Jan 27th, 2016 at 2pm.
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