With global equity and especially FX markets underoing historic moves in the last two days, every trader’s playbook has been tossed aside as setups and trendlines everywhere have been broken. So for everyone trading on nothing but momentum – which these days is most, and certainly all algos – here are some observations from BofA’s chief technicial Stephen Suttmeier who says that with the S&P failing to breach 2,100 again, and having broken 2025, “all eyes are now on 1950.”
The S&P 500 has once again stalled within the 2100-2135 resistance. Today’s break of 2025 (May low), if sustained into the close, places the focus on 1950-1930 or 8-9% down from the early June high. The latter level is near the 61.8% Fibonacci retracement of the February to early-June rally near at 1928.69
Another interesting chart: US stock leadership is posting a new weekly high vs. rest of the word.
The US remains leadership and scored another new weekly relative high vs. the rest of the world last week. The last big relative up cycle for MSCI US (MXUS) vs. MSCI World ex-US (MXWOU) was from a November 1988 low until a January 2002 peak. If the current cycle lasts as long, the US could outperform the rest of the world until early 2021.
What about the future? Suttmeier points out a rare event in the S&P: the SPX is up over 1% on Thurs & down over 3% on Fri
Last Thursday’s gain of 1.34% followed by Friday’s drop of 3.59% was the 76th time going back to 1928 that the S&P 500 had a session gain of at least 1% followed by a session loss of at least 3%. This is also the first time this has happened since 11/9/2011 and 8/10/2011. Following this rare event, the S&P 500 has negative average and median 10, 20, and 30-day returns, sub-par 65, 130, 190, and 250-day returns, and is up less often than average over these periods.
Finally, note that Friday (6/24) was was 400 calendar days since the S&P 500 hit a new 252-session (52-week high). This has happened only 19 times since 1929. After going 400 calendar days without a new 52-week high, the S&P 500 has sub-par 10, 20, 30, 65, 130, and 190-day returns but the 250-day return is more in line with the historical average (Table 6). We believe a new 52-week high on the S&P 500 after a long pause would be bullish and this has proven to be elusive given stiff 2100-2135 resistance. However, the silver lining is that 13 out of the prior 18 times the S&P 500 went 400 days without a new 52-week high the S&P 500 hit a new 52-week high within the next year.
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