Brexit vs Bremain campaigns continue to dominate headlines as the Sterling slides to two-month low. We closed out last week with a distribution day as all three major equity market indices lost ground on accelerating volume. In a rather clear reflection of the “risk-off” theme that has dominated the last two trading sessions, the NASDAQ led the way lower, losing 1.29% on the day. The S&P 500 followed suit by losing 0.91% and the Dow Industrials gave back 0.66%. Volume expanded on the NYSE (+6.43%) and Nasdaq (+11.83%).
The sector heat map on the day also reflected the cautious tone that has prevented equities from punching through to new closing highs.
The only sector of the broader markets to gain ground on Friday was Healthcare. Every other sector lost ground. Telecoms (-0.53%), Industrials (-0.49%), Basic Materials (-0.45%) and Financials (-0.28%) provided the largest weight to the broader market.
If trading in Asian markets in the overnight is any indication, today will likely provide more of the same weak price action that we were treated to at the conclusion of last week.
Japanese equities have slumped to a one-month low while the MSCI Asia Pacific Index lost nearly 1.1%, the Topix slid 2.2% and Korea’s Kopsi Index dropped 1.4%. Concern over the fallout from a potential “Yes” vote on Brexit, uncertainty over this week’s FOMC Announcement and indications of a degree of economic exhaustion here in the US have acted to re-enforce resistance at the 2100 level for the S&P 500.
My call for range bound trading has been largely predicated upon uneven economic readings from retail sales to inflation coupled with the most recent slowdown in employment gains among other factors.
These themes will all be given another look this week. The economic calendar will be dominated by the FOMC Meeting on Tuesday and Wednesday not to mention the FOMC Announcement and Chair Yellen’s press conference on Wednesday. Additionally, on Tuesday we receive Retail Sales, Import/Export Prices and Business Inventories. Wednesday’s PPI-FD release coupled with Industrial Production and the EIA weekly Petroleum Status Report will likely provide context for the FOMC narrative mid-week. Thursday we receive consumer prices, jobless claims and housing data.
To top the week off we have a quadruple witching on Friday which will lead to a surge in volume on Thursday and Friday.
If that surge in volume coincides with an S&P 500 below 2100, any gains in the near term will be even more difficult as recent resistance at 2100 will be confirmed yet again.