US equities were mostly higher in Wednesday trading, though finished well off the best levels of the day. Industrials, Energy and Financials outperformed. Consumer Staples (grocers), Technology (semis), and Communication Services (internets) finished lower. Treasuries were mixed across the curve. The dollar was weaker vs euro and sterling, flat vs the yen. Gold settled down 1.7% after back-to-back gains. WTI Crude settled up 2.0%.
Should this bounce from the initial low gain some traction, we want to look at key retracement levels of the move lower to get a sense of where the advance has the potential to stop. The 38.2% retracement level is near $264 for SPY; the 50% retracement level is near $278 and the 61.8% retracement level is near $292. The goal is not to call every twist and turn in the market but to get a sense of how the general trend may unfold.
S&P futures are down 0.9% after US equities posted back-to-back gains for the first time in over a month. Asian markets mixed overnight as Japan, China and South Korea all finished lower. European equities are weaker. Treasuries are stronger with the curve flattening. The dollar is weaker on the major crosses, particularly against the yen. Gold is down 0.2%. WTI crude is off 3.0%.
Looking at Market Breadth
S&P 500 Breadth
The 5-day moving average of the number of declining stocks in the S&P 500 has been making a series of lower highs over the past two weeks. This increases the odds that Monday marked the initial low for the move.
The percentage of stocks trading above their respective 200-day moving averages is 3% from 10% last week. The indicator has made a new five-year low this week and, while trading at washed out levels, we prefer to see signs of improvement before taking a contrarian bullish view on the market.