Monday, November 5, 2018

Weekly Outlook for the S&P500

S&P500: Some keys for the week.


In the fundamental aspects, there are important events this week that will determine the path of the SPX, highlighting two: one, the US Midterm elections, which will surely end with the Senate in the hands of the Republicans, and the Congress probably with the Democrats. Any other result would give the market strong volatility. The other, on Thursday there will be the FED Announcement, where, although no Rate Hike is expected, traders' eyes are in the report with the perspectives of the Central Bank for 2019. In the background, like every week since April, the catalyst of always: the news of the advances (or setbacks) in the Trade War with China. Any news here moves exaggeratedly the SPX and the entire market. Thus, last Friday, Trump announced that he was close to an agreement with China (SPX immediately soaring 1%), and then Larry Kudlow expressed prudence even on the subject (SPX abrupt sinking -1%). All in few hours of session.


To take into account: the period from November to January
is historically the most bull on Wall Street.


Within the technical aspect, despite its good last week, finally the SPX index closed October below its 10-month simple moving average, the SMA10. A worrisome signal as, it was already commented in this previous post, is an indicator used by "heavy" banks and financiers to make long-term decisions. This month of November, it is advisable to follow the market with caution, ideally, as I said, by exiting long-term positions. In my case, I already did it, and I will only operate with very short-term trades with tight stop losses.


Its daily chart sees a recovery towards its SMA200, in a new attempt to overcome it and give the green light to the traditional Christmas mini-rally. It has already been commented many times that the period from November to January is, historically, the most bull on Wall Street, and if the SMA200 is not overcome, it is very difficult to wait for this year to happen. You can also see an interesting bull crossover in the MACD but with the plot even in negative territory.


SPX is heading towards its SMA200 in a new attempt to overcome it
and start the mini Christmas rally.

10-year US T-Bonds: follow $TNX chart


The TNX chart will be the most important that I will follow this week. Remember that the recent "Red October" began due to its fierce increase, reaching levels of 3.25% that it had not since 2013. 

Last week it began another solid uptrend, and we already know how sensitive Wall Street is to this rises, as well as to inflation, both causing to cool a healthy economy. Already in this previous post I commented that finished the sell-off this yield could continue its rise to the level 3.5% to give more steep to the currently very flat yield curve, not consistent with a growing economy like the North American.

TNX approaching again at 3.25%, the level that burst Red October. Go with caution if it get over this week. On my radar.


Crude Oil, /CL: pullback ends?


In an environment where there are positive and negative aspects for the market, the Crude Oil will take importance these weeks like the faithful of the balance, that probably mark the way the SPX will follow.

The recent and strong pullback of the price of Crude Oil suits very well for the market, since it is a factor that helps the inflation index not increase excessively. Throughout the year /CL price has been rising to over $75 level and although it was expected to increase further with the problems of Iran, finally the necessary technical correction has brought its price to $63, below its important SMA200. The interesting thing is that this pullback could be ending soon because the price is completely oversold and can turn around.


Crude Oil in October below Ichimoku Cloud and last week below its key SMA200, breaking $64 level. Many bearish signals. In favor: hugely oversold.
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