An Eerily Quiet Friday Open

The SPX started yesterday out with a lot of potential for a large upside move only to fall back below Overbought levels.  Today’s range is still wide open with an Oversold level of 1266 and an Overbought level of 1317.  Overnight, futures were substantially lower, but have increased to slightly below fair value.  Treasury yields are lower this morning with the 10 Year Note currently around 1.576%.  If the SPX is going to move higher, Treasury yields will also need to move back to at least 1.70%; they were close to that level yesterday.  I do not believe that the 10 Year Note needs to yield 2.40% (just above their high yield in March) in order for the SPX to reach new YTD highs, however yields will certainly need to break 2.00% to the upside.

Based on the overnight action in equity futures and the direction of Treasury yields, the SPX is susceptible to a move to the downside here.  A close above 1320 today would be a significant sign equities have some momentum to move higher next week.  A close lower could indicate that this short-term rally has stalled.  In a dynamic and ever-changing market environment, today’s trading is an important tell for what lies ahead next week.

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