SPY, Yields Top and China
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Similarly to Thu CPI, S&P 500 couldn‘t maintain a modest retracement following the disappointing manufacturing data, but still strong retail sales. Tech failed to react to the reversal in yields (10y back to 4.21% on the close yesterday, and retreating even more today) – arguably the decline was less of a result of banking downgrades echo than it was thanks to the China rate cut, liquidity mop up (preparations to defend CNY), and growing risks within the shadow banking sectors as much as growth prospects. Hence the renewed calls for increasing domestic Chinese consumption.
Today‘s housing and industrial data would come in mixed – permits may still rise while starts would be sputtering, and industrial production and capacity utilization wouldn‘t be a stark disappointment in the least. Just enough to keep soft landing hopes alive while throwing a bone to Fed pivot callers – such is my prognosis and another Intraday Signals call it led to.
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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 4 of them.
S&P 500 and Nasdaq Outlook
4,487 – 4,492 is a pipe dream when stocks are probing, probing a breakdown below the key trendline described in the caption. Tech certainly missed 4,435 - 4,440 is a key area to defend – especially since yields peaked yesterday – well, only to get tested again today premarket, which is to keep a lid on appreciation, but 4,460 is reachable provided that 10y goes below 4.20% again. The bias is for a retracement higher following the market open.
Crude Oil
Crude oil is resting for now, and I wouldn‘t expect a significant move over the next two days. All details are in the caption – slowly digesting recent sharp gains and crucially still having to adjust to the disappointing China data where indicatively even some funds are asked to forego selling stocks at the moment… If you remember the bank shares shorting ban of 2008, that didn‘t help the sector in the least...
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