Weekly Watchlist 6/22

Last week the SPX finished at 921 and had its first negative week in a month. I think the coming week could prove to give us a direction that the market may trend with in the coming month. After falling from 950 to 900 recently the SPX bounced back to the 925 area as options expiration controlled the market last week. It feels like the market is a bit heavy here and even in the last month while more and more bulls jumped on the bandwagon of the strong rally, price has really not budged from where it was in early May. It seems to me like sentiment is topping out and perhaps giving a contrarian signal to be cautious of a pullback.

Technically the charts show support at 900 and 880 but below that mark and we could be in for a more dramatic selloff into the lower 800s during the coming months. I'm not saying it will happen but its something to watch for sure. Other markets are usually a great leading indicator to the stock market. On Friday, while the dollar was down sharply, the crude oil market reversed lower quickly to close under 70. The dollar and oil are usually inversely correlated and when the relationship acts differently it tells me we could see a coming reversal in both crude and the dollar. Meaning that crude oil is ready to pullback and with that the energy sector (which has already started pulling back) should put pressure on the broader SPX. Energy has been holding up stocks as of late and without this anchor, I think the SPX could see a bigger retracement.

With that said, the FOMC announcement comes this week and should make things really move in the bond and currency markets. It will be interesting to hear what they say about potential inflation and rate hikes as bond yields have risen plenty since the last FOMC meeting.

Overall, I would be expecting a pullback going into the end of the month but we could also start to see some window-dressing as funds mark up their performance as well. Either way, I would be positioning more delta neutral to negative in my exposure for now.

The watchlist:

Flags>>> FFIV, DLLR, DECK, PLCM, TEN, BID, RMBS

Triangles>>> CVC, MGA, CEG

Breakouts>>> HPQ, BAM, TCO