FOR TUESDAY: (5/30) Quiet markets on Monday didn’t tell us much. The Fed’s Williams said three rate hikes in 2017 made sense and balance sheet normalization should begin this year. The pound posted the biggest gain among G-10 currencies, though the bounce wasn’t enough to erase Friday’s plunge when polls showed the coming election may be closer than expected. Oil trades back under $50/bbl as boost in U.S. drilling activity threatens OPEC’s efforts to reduce a global supply glut. On Friday Baker Hughes revealed U.S. explorers added 2 rigs to 722, highest level since April 2015. After the market was unimpressed with accord Thursday to prolong output limits, Saudi Arabia’s Energy Minister Khalid Al-Falih said the strategy is working, global stockpiles will drop faster in 3Q
As Bloomberg notes, despite the longest winning streak for U.S. stocks since February and record highs posted by equities globally, the ongoing bond rally hints at an undercurrent of investor caution. With the fate of the Trump administration’s pro-growth stimulus plans uncertain, the dollar is one of the weakest-performing major currencies this year, even as the Federal Reserve prepares for more rate hikes. Gauging the ability of the global economy to withstand rising borrowing costs will be key for traders.
“The U.S. economy is about as close to the Fed’s dual-mandate goals as we’ve ever been,” Federal Reserve Bank of San Francisco President John Williams said in Singapore on Monday. “With the attainment of our dual-mandate goals close at hand, it’s more important than ever for monetary policy to work toward what I like to call a ‘Goldilocks economy’ -– an economy that doesn’t run too hot or too cold.”
Three-day holidays can be crazy but not enough news to create that. We often can see sideways action as people come back late from the holidays. Still, the first day of the trading week before employment report can be a big-range day.
JUNE E-MINI S & P 500
S&P ANALYSIS FOR TUESDAY: (5/30) The minimum pattern completion came in at 2418 but it is probably a minor 3rd-wave completion and pullbacks into Monday/Tuesday should hold 2404 or max 2394.50. NQ support is at 5766 with a new high possible to 5819 coming and eventually 5984 into mid-June. Chances are the market is a 1-2 day sale but we may not get more than 10-12 points. We can put in orders for selling a double-top if it hits overnight.
New weekly chart projections have suggested 2520 and we thought that might be next year but the way the market is telescoping we could see 2520 this year and then 2750 next year. Too early to think of that but we have to keep the big picture in mind.
OVERALL: We need to set our sites higher, as the game continues and may not really let up until after mid-June. Daily chart projection to 2430 now and the rule is not to sell a market in new high territory. NQ is now suggesting an extension up to 5984 and it usually has the greatest upside potential so late bulls will have to look there.
WEEKLY CHART: New weekly chart projections have suggested 2520 and we thought that might be next year but the way the market is telescoping we could see 2520 this year and then 2750 next year. Too early to think of that but we have to keep the big picture in mind for you.
LONGER TERM: (5/26) If we see 2520 in June than maybe only 2300 will come in with max. correction to 2150 into October. May not get the sell signal until June.
CYCLES OVERVIEW: Lower into /Monday and Tuesday; higher into May 31.
