This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Breakout Brewing?

With the 3200-3230 support level holding strong on the S&P 500, we remain constructive over the intermediate-term as outlined in our 11/3/20 Compass. Considering current market dynamics we see eventual decisive breakouts as the most likely outcome for the major averages, which justifies our positive outlook. At the same time, with the S&P 500, Russell 2000, and Nasdaq 100 climbing 7-12% in just over a week and all three testing logical resistance, we believe there is potential for some near-term backing-and-filling. Continue to buy dips.

  • Testing Resistance. Both the S&P 500 and Russell 2000 hit new all-time intraday highs at the open yesterday (11/9/20), but this was met with selling pressure throughout the day as breakouts were rejected. Short-term levels we are watching on the S&P 500 include resistance at 3588 and support in the 3521-3547 range… see charts below.
  • Sector Relative Strength Rankings & Weighting Recommendations. Last week we noted that Energy was the only Sector in a downtrend — that is, until now. With bullish short-term price and RS reversals on cap- and equal-weighted Energy (XLE and RYE), we have the Sector on watch for a potential upgrade.
  • WTI Crude Oil; 10-Year Treasury Yield; US Dollar; Big EM Breakout. One reason we are hesitant to upgrade the Energy Sector is because WTI crude oil remains below important resistance at $41.50-42. Additionally, the 10-year Treasury yield is testing the important 0.95% resistance level; a breakout above this level would make cyclical value Sectors like Energy and Financials all the more attractive. The US dollar (DXY) is testing key support at 92; a break below this level would provide a risk-on signal for global equities and would be a tailwind for commodity prices. Speaking of risk-on signals, we are getting a big one from emerging market equities, as the EEM ETF displays a big breakout above $46.30 resistance.
s&p 500, russell 2000

Originally Published on November 10, 2020

Disclosure: Vermilion Research

The information contained herein is privileged, confidential and protected from disclosure. Any unauthorized disclosure distribution, dissemination or copying of this material or any attachment is strictly prohibited; such information, whether derived from Vermilion Vermilion Capital Management, LLC or from any oral or written communication by way of opinion, advice, or otherwise with a principal of the company is not warranted in any manner whatsoever, is for the use of our customers only and may be obtained from internal and external research sources considered to be reliable. It is not necessarily complete and its accuracy is not guaranteed by Vermilion Capital Management, LLC, its operating entity or the principals therein. Neither the information nor any opinion expressed constitutes a solicitation for the purchase of any future or security referred to in Vermilion research publications. Principals of Vermilion Capital Management, LLC may or may not hold, or be short of, securities discussed herein, or of any other securities, at any time. The foregoing also expressly applies to any trial subscription.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Vermilion Research and is being posted with permission from Vermilion Research . The views expressed in this material are solely those of the author and/or Vermilion Research and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.

trading top