As has been the case for many months, bullish conviction in equities continues to dry up any time price approaches new highs. Rather than blame the lack of oomph on anything in particular, I think it makes most sense to recognize the phenomenon and avoid falling in love with price momentum any time new highs are in sight. I'd like to say I expect this Friday's employment report to jump-start some renewed excitement in equities, but I already said that about the April 29 FOMC meeting. And that clearly didn't pan out.
Moving on to Tuesday regular session E-Mini S&P 500 futures (Es) auction, Monday's balanced auction has me looking for responsive activity in the vicinity of that session's intraday highs and lows.
Responsive sellers are expected to lurk toward 2114.50, while bids are likely to build between 2105.50 and 2101.50. Anyone banking on another turn lower needs to see the contract close beneath the big figure.
1. Without question, the most exciting part of this market continues to be found in the bond pits. While equity futures bounce around with zero commitment near 52-week highs, bond bears are finally enjoying a bit of time in the sun. The question is: can bonds bears maintain their current momentum?
Referring to the daily iShares 20+ Year Treasury Bond (TLT) chart above, my primary concern with selling bonds into this current weakness is the location of the 14-day Relative Strength Index (RSI). The RSI closed near 29 on Monday, and that's generally assumed to be oversold territory. In fact, the last two times the RSI closed under 30 while the 200-day exponential moving average (EMA) was rising or flat, buyers re-entered the market in very short order.
For reference purposes, the dates of the two prior RSI closes beneath 30 when the 200-day EMA was essentially flat are Sept. 14, 2012 and Aug. 16, 2012 (not shown on the chart above).
The bottom line is that while I'm a bond bear on a much higher timeframe (the monthly 30-year yield chart above is our reference point here), the day timeframe trader in me wants to tighten up stops on any existing short and get ready for a bounce. And as far as re-entering a TLT short is concerned, I'd love to see a failed attempt to recapture the 50-day EMA. But at a minimum, let's sit back and wait for a test of the eight-day EMA.
2. GoPro (GPRO) has provided nothing but loses for bulls since October 2014, but that may be about to change. To be clear, I'm not really a fan of their camera on a stick. Then again, I've never been accused of being an early adopter of anything technology-related.
GPRO gapped higher following its most recent earnings release, but as you can see, it was quickly rejected from its multi-month downtrend line. Setting aside the fact that I don't believe its niche is a terribly difficult one to enter, anyone wanting to gamble on a secondary upside break in the name should be tracking the eight-day EMA. Assuming the earnings gap wasn't another one-and-done situation, we should see buyers respond to a test of that short-term reference point. Suffice it to say, a close under the 50-day would be a bull killer.
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