April’s high for the S&P500 was not confirmed by the Russell 2000, a potential warning signal says Ari Wald at Oppenheimer. This differs from 2013 when each new monthly high was ‘confirmed’ by a higher high in the Russell index.
BNP Paribas remain bullish for the longer-term outlook for US stocks despite the likelihood that the S&P500 will test support at 1800, at the long-term trendline. If this is broken in this correction, the bank sees the next support at 1740. Their longer-term bullish outlook remains in place as prices are still above the 200-day MA.
Market breadth measures suggest the S&P500 may have further to go in the short-term. However. Bloomberg proprietary indicators are saying that stocks are overextended with longer-term momentum weakening. Also included in this review is FX, bonds, commodities and volatility analysis.
Most commodities will suffer a bearish second quarter according to Wang Tao, technical analyst at Reuters Singapore. Included in this outlook is gold, metals and grains which are expected either to resume a downward trend or complete recent rebounds.
The recent rise of the US 10-year Treasury yield and the prospect of a sustained rally beyond 3% may lack conviction, according to Mike Sacchitello of Stone McCarthy Research Associates. The US financials/utilities ratio, historically a reliable indicator, has failed to support the rally.
The best indicator for US stock direction at present is the 10-year Treasury, says Ari Wald at Oppenheimer & Co.
Technical analysis platform, Updata, has announced a partnership with data provider, Global Financial Data. The GFD database includes commodities, economics data, FX, equities and fixed income data with stock data on 50,000 securities going back to 1789.
The Eurostoxx 50 of the largest cap stocks are outperforming the DJ Stoxx 600 but the next largest 150 are not, which is usually suggestive of a market top, according to Riccardo Ronco of Aviate Global.
The 30 year yield of the German Bund is in overbought territory with the bigger picture suggesting still lower yields to come, says Chris Williams at Newedge. This view is further supported by the failure of the 30yr yield at the 2.527 level, and a continued weakness in stocks.
The euro has once again failed to break through the long term trendline that began in 2008 suggesting a bearish outlook for the currency, says Max Knudsen of ADS Securities. As such, the outlook remains negative whilst the currency remains below 1.3900.