The fate of the S&P hangs in the balance and these 3 factors should decide it

The slower summer season is nearly upon us. For investors, that means if this market isnt crashing, then its bullish.

So says Cracked Market blogger Jani Ziedins, who thinks the path of least resistance for equities is still higher, largely because a) scary trade headlines dont have the bite they did months ago and b) the sell the news crowd largely bailed out weeks ago. (A reboot on that war of words between North Korea and the U.S. ahead of the an on-again, off-again summit may be another matter.)

While Ziedins seems fairly at ease about this stock markets direction, and futures have an air of summertime laze about them, you might want to sit near the lifeguard based on our call of the day.

It comes from Canaccord strategists Martin Roberge and Guillaume Arseneau, who say the S&P 500 has been following a correction road-map since the 10% February pullback, but now faces a fork in the road that will be decided by the performance of three big assets.

They see the S&P headed for some choppy waters over the next few weeks before that definitive move higher or lower, which is laid out in this chart:

The S&P 500s fork in the road

They mark out two diverging directions for stocks based on Fed tightening scenarios. The green line indicates a bullish scenario for equities, predicated on Powell and the Fed gang managing a so-called soft landing interest rates rise enough to keep inflation under control and not trigger a recession. The blue line shows a hard-landing scenario rate hikes trigger a recession and equities pull back.

Canaccord analysts are betting investors will get path No. 1, but arent turning their backs on a hard landing. They say a combination of three things 10-year bond yields above 3.25%, oil prices atop $75 a barrel and the ICE Dollar Index above 95 would trigger a recession and hence a slide for stocks.

This does not mean that stock markets would peak right away. Nevertheless, we believe equities would become a higher-risk proposition, say Roberge and Arseneau.

For now, they have no worries about bonds or a bigger dollar blowout, but are keeping an eye on the oil-price wildcard.

Check out: How stock-market investors could be surprised by a peak in interest rates

The market

Bring on summer. Dow industrials
YMM8, -0.12%
, S&P 500
ESM8, -0.07%
and Nasdaq-100
NQM8, +0.03%
futures are going nowhere fast, after that move higher for the Dow
DJIA, +0.21%
, S&P
SPX, +0.32%
and Nasdaq
COMP, +0.64%
on Wednesday.

The dollar
DXY, -0.14%
is down, and the Turkish lira
USDTRY, +4.0864%
is back under pressure after yesterdays central-bank move thats clearly not working. Crude oil
US:CLM8
is down and gold
GCM8, +0.46%
is up.

Read: How emerging-market carnage is boosting the yen

Asia
ADOW, -0.10%
had a bumpy session, while European stocks
SXXP, +0.17%
are moving up as Italy fears ease.

See more in Market Snapshot

The buzz

Auto stocks in Asia and Europe took a knock from reports Trump is considering new tariffs on cars and car-part imports.

And no rest elsewhere on the geopolitical front, after North Koreas senior envoy for U.S. affairs called Vice President Mike Pence a political dummy and suggested a nuclear-to-nuclear showdown if the June summit with the U.S. doesnt go ahead.

Apple
AAPL, +0.64%
is reportedly teaming up with Volkswagen
VOW3, -2.88%
VLKAY, -1.65%
to modify VW vans into self-driving shuttles for its workers. Thats after BMW
BMW, -2.64%
and Daimler rejected Apples partnership ideas.

Deutsche Bank
DBK, -3.41%
DBK, -3.66%
is down as a shareholder meeting turned ugly for Chairman Paul Achleitner, with calls for him to step down. The German bank says itll cut more than 7,000 jobs.

Keep an eye on GE
GE, -7.26%
this morning after CEO John Flannery, speaking at a conference, triggered a meltdown for shares.

The Department of Justice has reportedly opened a criminal probe into whether traders are manipulating bitcoin
BTCUSD, -3.16%
prices, which have clearly seen better days.

Updates on weekly jobless claims and existing home sales are the key data today. New York Fed President William Dudley spoke in London early, but didnt touch on monetary policy, and Philly Fed President Patrick Harker is on the docket too.

Think you can time this market? Heres a game that will prove your level of genius (or not). (h/t Crossing Wall Streets Eddy Elfenbein)

The chart

The Nasdaq led yesterdays gains, with a standout performance by star player Netflix
NFLX, +3.95%
, whose nearly 4% pop was its best one-day gain since mid-April. That got the attention of Michael Kramer, founder of Mott Capital, who called it a breakout of epic proportions.

Heres his chart:

The breakout came on strong volume, which is a bullish indication. Additionally, the relative strength index also broke out, crossing above a downtrend, another bullish signal, Kramer explains in an email to MarketWatch.

And he thinks this is bullish for stocks overall. Netflix has been the leader all year long, and the soldiers will follow the generals, and there is no doubting Netflixs leadership this year, he adds in the blog.

The stat

$200 million Thats how much a Goldman Sachs
GS, -0.08%
unit made in a single session in February, after the Cboe Volatility Index
VIX, +2.54%
logged its biggest one-day move on record.

The banks derivatives unit raked in that huge profit after making a bullish bet on volatility as the VIX surged 116% on Feb. 5. The profit that session was more than the division typically makes in an entire year, reports CNBC, citing sources.

The quote
20th Century Fox/Courtesy Everett Collection Jessica Walter on set with Jeffrey Tambor.

Im incredibly embarrassed and deeply sorry to have done that to Jessica. This is a big learning moment for me. I shouldnt have tried so hard to mansplain, or fix a fight, or make everything okay. that was actor Jason Bateman on Twitter this morning, apologizing over his part in a group interview with fellow Arrested Development cast-members.

The Internet erupted over how Bateman helped defend male co-start Jeffrey Tambor who Jessica Walters said verbally abused her on the set. Tambor was fired by Amazon
AMZN, +1.29%
after accusations of harassment and sexual abuse.

Heres a couple from his tweetstorm apology:

Based on listening to the NYT interview and hearing peoples thoughts online, I realize that I was wrong here.
I sound like Im condoning yelling at work. I do not.
It sounds like Im excusing Jeffery. I do not.
It sounds like Im insensitive to Jessica. I am not.
In fact, Im-

— Jason Bateman (@batemanjason) May 24, 2018

– horrified that I wasnt more aware of how this incident affected her.
I was so eager to let Jeffrey know that he was supported in his attempt to learn, grow and apologize that I completely underestimated the feelings of the victim, another person I deeply love – and she was..

— Jason Bateman (@batemanjason) May 24, 2018
Random reads

New York Jets boss says hell pay any player fines over new anthem rules.

Huge political corruption probe in Spain ends in lengthy jail sentences for ringleaders.

Woody Allens son says his mom was the abuser, not his dad.

Hawaiis erupting Kilauea volcano is now spouting blue flames

Not just a pic, here's the video. Buried and burning vegetation produces methane, igniting in road cracks to produce a blue flame. K墨lauea Volcanos Lower East Rift Zone. t.co/RGbJxzEYxF pic.twitter.com/2H1iPpzcKZ

— USGS Volcanoes (@USGSVolcanoes) May 23, 2018

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Follow MarketWatch on Twitter, Instagram, Facebook.

Barbara Kollmeyer

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.

We Want to Hear from You

Join the conversation

Comment

Related Topics U.S. Stocks Markets NY Stock Exchange NASDAQ

Quote References YMM8 -29.00 -0.12% ESM8 -2.00 -0.07% NQM8 +2.00 +0.03% DJIA +52.40 +0.21% SPX +8.85 +0.32% COMP +47.50 +0.64% DXY -0.13 -0.14% USDTRY +0.1870 +4.0864% GCM8 +5.90 +0.46% ADOW -3.68 -0.10% SXXP +0.66 +0.17% AAPL +1.20 +0.64% VOW3 -4.94 -2.88% VLKAY -0.67 -1.65% BMW -2.34 -2.64% DBK -0.37 -3.41% GE -1.11 -7.26% BTCUSD -239.70 -3.16% NFLX +13.10 +3.95% GS -0.19 -0.08% VIX +0.32 +2.54% AMZN +20.46 +1.29% Show all references
MarketWatch Partner Center
Most Popular GEs stock suffers worst day in 9 years after CEO John Flannery starts talking Thinking of selling your home? Do it before 2020, economists say Cryptocurrency freefall shaves $50 billion off market cap in 72 hours This is how much you need for elite bankers to consider you a worthwhile client Why you don't need to worry about robots stealing your future job

Community Guidelines FAQs

BACK TO TOP MarketWatch Site Index Topics Help Feedback Newsroom Roster Media Archive Premium Products Mobile Company Company Info Code of Conduct Corrections Advertising Media Kit Advertise Locally Reprints & Licensing Your Ad Choices Dow Jones Network WSJ.com Barron’s Online BigCharts Virtual Stock Exchange Financial News London WSJ.com Small Business realtor.com Mansion Global

Copyright © 2018 MarketWatch, Inc. All rights reserved.

By using this site you agree to the Terms of Service, Privacy Policy, and Cookie Policy.

Download from the App Store Download from the Google Play Store Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.
Advanced Search
Stocks Columns Authors Topics

No results found

E-Mini Dow Jun 2018 U.S.: CBOT: YMM8 $24,830.00 -29.00 (-0.12%)

Volume 28305
Open $24,849
High $24,868
Low $24,754
P/E Ratio 0
Div Yield 0
Market Cap N/A

E-Mini S&P 500 Future Jun 2018 U.S.: CME: ESM8 2,728.75 -2.00 (-0.07%)

Volume 108.6K
Open 2,730
High 2,733
Low 2,720
P/E Ratio 0
Div Yield 0
Market Cap N/A

E-Mini Nasdaq 100 Index Jun 2018 U.S.: CME: NQM8 6,959.00 +2.00 (+0.03%)

Volume 41026
Open 6,957
High 6,975
Low 6,925
P/E Ratio 0
Div Yield 0
Market Cap N/A

Dow Jones Industrial Average DJ-Index: DJIA 24,886.81 +52.40 (+0.21%)

Volume 399.6M
Open 24,758
High 24,889
Low 24,667
P/E Ratio 0
Div Yield 0
Market Cap N/A

S&P 500 Index S&P Base CME: SPX 2,733.29 +8.85 (+0.32%)

Volume 2.0B
Open 2,714
High 2,733
Low 2,710
P/E Ratio 0
Div Yield 0
Market Cap N/A

NASDAQ Composite Index U.S.: Nasdaq: COMP 7,425.96 +47.50 (+0.64%)

Volume 0
Open 7,335
High 7,427
Low 7,335
P/E Ratio 0
Div Yield 0
Market Cap N/A

U.S. Dollar Index (DXY) U.S.: ICE Futures U.S.: DXY 93.82 -0.13 (-0.14%)

Volume 0
Open 93.92
High 93.98
Low 93.66
P/E Ratio 0
Div Yield 0
Market Cap N/A

Turkish Lira Tullett Prebon: USDTRY 4.7632 +0.1870 (+4.0864%)

Volume 0
Open 4.58
High 4.79
Low 4.55
P/E Ratio 0
Div Yield 0
Market Cap N/A

Leave a Reply

Your email address will not be published. Required fields are marked *