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Safe Havens retreat, while Europe breaks out

September 12, 2017

S&P SEPT FUTURES (SPu7)
Contact: info@newtonadvisor.com

2472-3, 2459-60, 2455, 2438      Support
2490-1, 2500-5                            Resistance

 

SPX - (2-3 Days)- Bullish-Upside looks to extend possibly to 2500-5 for SPX, with rally potential between now and Thursday's close.  Prices should be watched carefully for any evidence of reversal, and selectivity is important at this stage of the rally.  Undercutting 2443 would help S&P move down to retest lows. 

SX5E- EuroSTOXX 50- Bullish-  Near-term gains look likely given Monday's breakout of the trend from May, which unless reversed right away on Tuesday/Wednesday and back UNDER 3433, has to be respected.   Near-term resistance lies at 3515-25. 

HSCEI- No Change- Bullish- Rise to new multi-day highs after minimal pullback keeps bullish bias intact.  Final push higher up to near 11550-600 likely which could be used to sell into.    


Trading Longs:   FXI, VAR, AMGN, HAL, NSC, UNP, ORCL, HLT, HP, HPQ
Trading Shorts:  GLD, SLV, DIS, LEG, BBBY, AIZ, LNC, VIAB, COH, KODK


TECHNICAL THOUGHTS


Monday's ability to exceed the highs of the past four trading days on above-average breadth was thought to be a minor positive for SPX, and despite the ongoing issues with momentum (which won't go away anytime soon), we saw both Tech and Financials show excellent participation yesterday.   Given that Semiconductors led the performance among the secondary groups, and SOX still has a half-way decent technical pattern which can allow for upside, it's thought that Technology might attempt a final push into mid-to-late September before peaking out.  Financials also showed sufficient strength to get right back to important downtrend line resistance along with Treasury yields which should be important in the days ahead (and Necessary to exceed to keep the financial rally going) 

What was important yesterday largely revolved around the degree that safe Haven trades reversed all in unison.  We saw Treasuries and Precious metals decline at the same time as the Japanese Yen , which had all largely rallied in weeks prior coinciding with the uptick in North Korea tension and uncertainty regarding the US recent natural disasters with two different hurricanes striking land within two week's time.  The degree to which these might cause economic harm is beyond the scope of our technical thoughts, but certainly important three months down the road for the possibility of any December hike.  (Odds at this point remain just 35% for a hike in December, and lie <1% for both September and November.)  Given that the Fed doesn't like to disappoint the market, there shouldn't be much talk of any hike until we see data improvement ahead of December, (if and when that occurs.)   Any stock market pullback in October is likely to reduce the odds further that any further hike happens this year.

Technically, it's worth making the point that DJIA and SPX charts both show the chance for a bit more upside, along with USDJPY, while Gold and Silver look likely to extend recent declines and weaken in the short run, coinciding with USD strength.  Treasuries along with the yield curve will be an area to watch carefully in the days ahead for evidence of upward progress and breakouts of trendlines in XLF and TNX, or whether these get repelled.   Overall, while its a MUST to remain vigilant in US stocks at this time, Monday seems to have taken a bit of the near-term pressure off, for the time being.
 

Additional thoughts and charts found below

ESd.gif

Yesterday's rally exceeded the highs of the prior four trading days to advance up to test intra-day peaks made in early August near 2485.   This area is indeed important in the short run, but yesterdays' move was definitely seen as a near-term positive given the degree that breadth expanded, (which at one point was 5/1 and finished still greater than 3/1 positive)  Technology, Financials, Materials and Energy all rose greater than 1% in trading, and provided at least a near-term positive backdrop for this rally, which historically had been failing to show much strength out of Financials, nor Technology.   Movement up above 2485 has targets at 2500-5, but we'll need to see more evidence of breadth and momentum expansion to have real confidence of a longer-lasting bounce in this seasonally weak time.   Any reversal from here back down under 2443 would be equally respected as being a warning for downside acceleration to come.  

sx5eD.gif

The STOXX 50 index made some good progress Monday, breaking out of the entire trend which held this in a tight downward channel since most of Europe peaked out during the middle part of May.   This is at least a near-term positive for Europe, and while the STOXX 600 and DAX still have some "work to do" in this regard to match this breakout, it bodes well for at least a minor European stock market recovery after a lengthy period of consolidation and "downward" bias since May. 

TNXd.gif

Treasury yields popped on Monday which largely led US stock futures higher along with the Financial space which rose nearly 1.75% on the session.   Both TNX and XLF rose up to very important areas of near-term resistance which will be important to surpass in the days ahead to have any confidence in the Financial sector continuing its recent rise.  Note that this area also coincides with prior yield lows from back in June.  Key area for XLF lies at 24.70.  In the short run, given last Friday's reversal and Monday's yield gains,  this area should have some importance, and be watched carefully, which lies near 2.12-3% for TNX.  

Yield Curve breakout bullish for Financials

March 10, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2355-6, 2349-51, 2344-5                Support
2369-71, 2375-6, 2390-2, 2400-2   Resistance

 

 


S&P Futures: (2-3 Days)- Bullish- Little to no weakness by end of day yesterday as markets recaptured early weakness again, while momentum has begun to strengthen with the yield curve breakout.  Movement up above 2370 should help drive a rally back to 2401 and above.  Look to buy weakness if given the chance Friday.

SX5E- EuroSTOXX 50- Bullish- Breakout of recent range occurred on Thursday with prices stretching back above 3400 which should help indices advance over 3500. 

HSCEI- Bearish near-term, with Thursday's close likely leading down to 10k and then 9910. 


Longs/Shorts for a 3-5 day period:  NO Change from Thursday

Technical Longs: XLF, EUFN, CELG, HOLX, PCLN, BAX, AAPL, FAST, COL, HUM, CI
Technical Shorts: FLR, FLS, MNK, GILD, SPLS, FOSL,  AES, AN, HTZ,



TECHNICAL THOUGHTS


Equities tried their best to pull back Thursday but yet again, rallied all the way to positive by the close, with the S&P closing over the highs of the last two days, while the NASDAQ 100 made the highest close of the week.  Breadth remained mildly negative with slightly more volume going into Declining vs Advancing issues, and Crude managed to pare its losses on the day, while Gold accelerated down to 1200, having fallen for four straight sessions and seven out of the last Nine.    Overall, with only 30% of SPX stocks trading above their 10-day moving average, one would think the market would be far lower than it is currently.  SPX has failed to even breach prior week's lows, and this entire selloff has largely occurred inside the range of last Wednesday's big surge, back on March 1.   It's thought that the indices have managed to absorb this correction attempt, and that higher prices are a good likelihood into next week's FOMC meeting.

Treasury yields rallying has been the biggest story in recent days, which has happened not just in the US, but globally, as seen in huge bond selling in German Bunds, Swiss 10s nearly turning positive.  The 2s/10s curve steepened meaningfully enough to break out of the downtrend that's kept they yield curve in flattening mode for the last few months, which bodes well for further steepening heading into the FOMC.  Given that ADP data came in very strong this week, the Jobs data very well might also be on the high side, which should result in further selling in the Treasury market, and help the Financials turn back up more swiftly.  For now, this a key factor as to why equities likely don't experience any type of material weakness into FOMC.


Crude oil's decline accelerated further Thursday following the quick selloff into Wednesday's close.  The trend here is short-term bearish, despite Crude's ability to lift a bit from earlier lows.  Commodities as a whole have suffered in recent days, led by Energy, Precious metals, and Softs like Sugar, Coffee, with the grains also beginning to look "toppy"  Overall, it's thought that the Dollar rally could result in further selling in the space, as we've talked about in recent reports.  The gains in Dollar vs Yen in particular was quite important and positive, and the Yen decline looks ripe for additional downside volatility in the days ahead, and could move lower much quicker than Euro, or Pound Sterling vs USD.  Stay tuned.


Additional thoughts and charts found below

 


S&P's snapback rally managed to recapture the early day's weakness, yet again, holding up near the key 2365 level and very close to the level of downtrend line resistance which has held for the last few days.  Thursday's close managed to surpass the highs of the last few days, and should make a rally likely on Friday, setting up for further upside into next week.   Momentum has begun to strengthen on hourly charts, and as we've discussed, despite the underlying weakness in many stocks, we're just not seeing that in the indices themselves.  S&P has barely given back 25% of the rally from end of year 2016, while NASDAQ has barely budged in recent days, and seems to be setting up for a move back higher.

 


2's/10's curve has steepened back up above an area of resistance  which should bode well for further rallies in the curve into next week and beyond.  This is the first meaningful sign of steepening since the curve peaked out in December, and is thought to be a notable positive for Banks, and in turn, a tailwind for Market bulls in the next 1-2 weeks. 
 

 

The Financials complex has not yet participated on this latest rally in yields, but has proven resilient and not shown any signs of real weakness in recent days that would suggest a pullback is upon us.  Given that Financials outperformed and held up above key support at 24.65 Thursday, they set up well for a bounce in the days ahead given the yield curve steepening.  Financials should perform well in this environment, which in turn should help provide a tailwind for stocks given their size within the SPX.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

NASDAQ resilient, while TY yields breaking out, metals weakening

March 9, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2356-7, 2349-51, 2345       Support
2373-5, 2381-2, 2390-2, 2400-2   Resistance

 

 


S&P Futures: (2-3 Days)- Bullish- S&P has sold off for four of the last five days, yet has NOT taken out last week's lows, nor is even beneath the lows from last Wednesday which precipitated the large rally.  While the near-term trend has arguably turned down, the factors of bullish Tech and Financials strength still suggest that pullbacks should prove short-lived and the larger move in the near-term remains to the upside.  Pullbacks at this point, if they were to breach Wednesday's 2356 lows, should reach 2349, the lows of the consolidation, before turning up. 

SX5E- EuroSTOXX 50- Bullish- Little of the weakness seen in US is occurring in Europe, where prices have forged higher.  Movement up to 3500 looks likely.

HSCEI- Neutral, turning to bearish under 10102- Thursday's early am pullback has resulted in prices undercutting Wednesday's lows, and unless recouped by Thursday's close, would suggest a move down to 9910 is imminent.


Longs/Shorts for a 3-5 day period:  NO Change from Thursday

Technical Longs: HOLX, PCLN, EA, BAX, YCS, ATVI, AAPL, FAST, COL, HUM, CI
Technical Shorts: EEM, CHK, FCX, AES, AN, MNK, GILD, TSN, COST, SPLS, HTZ,



TECHNICAL THOUGHTS


Tough market to say the least.   4 out of the last 5 days have been "DOWN" for SPX,  yet prices haven't even breached last Wednesday's lows, which saw the GAP higher out of the consolidation range.  NASDAQ, meanwhile, barely has registered any weakness whatsoever, and still sits 4 points away from last Friday's close, and has acted as of an upside breakout should be imminent.    Options flow seems to be betting on big moves in some of the Tech stocks and just in the last couple days alone we've seen over 30k contracts being bet on INTC's rise, with strikes nearly 10% higher, and double that amount in AAPL.  Yet for now, the market is churning, and the tape feels not all that steady.

Granted, a few serious negatives are now in place in the short run:   Breadth has dropped off substantially as might have been expected in the last week.  The advance/decline actually peaked back on 2/21.  the number of new 52-week LOWS on NYSE still outnumbers those making new highs.  And the percentage of stocks trading above their 10-day moving average has been cut in half in recent weeks, with percentages dropping from the low 80s% down to 35% as of Tuesday's close, 3/7/17.    Yet, the trends are still very much in place for most US indices, and most of the bearish arguments still have failed to result in any meaningful trend deterioration.

Importantly we have seen a few key positives in the last few days that also need to be mentioned.   The US Dollar has moved up sharply vs the Japanese Yen last week, (and Wednesday saw this hit multi-day highs again, as it carves out a base from mid-January.  Any daily close over 114.75 should help this push higher in a manner that would lead to a test of former highs back in December. ) This is positive simply given the degree of positive correlation that we've seen historically between USD/JPY and the SPX, which is north of R=.45.   Additionally, Treasury yields seem to have furthered their recent breakout, as TNX closed well above 2.52% and at one point was over 2.56%.   This was a meaningful breakout in yields with 5's, 10's, and 30s all showing meaningful yield strength.   Treasury yields and stocks have also trended well together since the election, despite going in the opposite direction over the last week.  So the yield curve has steepened a bit, and Financials, though having NOT responded thus far, should benefit from this move in yields and begin to move back higher. 

The Defensive stocks have fallen on hard times in the last few days, which typically occurs during "risk-on" moves, while the upswing in the US Dollar index has caused Emerging markets to underperform and EEM has turned down, lagging performance over the last few days.  Additionally the metals complex remains weak, as we've mentioned before, and should weaken further as USDJPY starts to accelerate and Yields continue their ascent.  

Overall, it doesn't look wise to abandon equities here with Tech and Financials acting strong, and such a minimal pullback effort within the existing uptrend which hasn't done any real trend damage.  However, we'll keep watch for signs of more deterioration from the Financials (which would be a negative) and/or signs of NDX or SPX, INDU dropping down under key support levels.


Additional thoughts and charts found below

 


NASDAQ has barely registered any real selling in recent days, and something to consider when gauging whether the market as a whole is ready to begin a meaningful selloff.  As of Wednesday's close, prices were just a few ticks away from levels registered last Friday.   While the breadth numbers have slid lower as a result of this consolidation, prices have held up in admirable fashion.  Demark sells are not in place on a daily basis,  and NDX would need to show a pullback down under 5300 to have concern.  At present, a rally back higher above 5400 looks more likely.   The key point here concerns the degree of resiliency in NASDAQ relative to SPX.  If the market were going to show real weakness, one would expect NASDAQ to turn down, and begin to lag substantially, which it has not.  Stocks like AAPL, GOOGL, MSFT are all well positioned technicallyand all managed to rise to multi-day highs on Wednesday.   
 

Emerging markets have proven to be a casualty of the US Dollar and yields turning up sharply and EEM fell to the lowest level on a closing basis since early February (37.89), which broke under late February lows.  Additional weakness looks likely here in the short run with downside targets at $37.15, or a maximum move near-term at $36.54 as support before this can stabilize.  However, Developed markets have all turned higher vs Emerging of late, and this weakness in Emerging markets looks to continue as the Dollar lifts. 

 

 

The US Dollar index's gains have already made very good headway vs Pound Sterling of late but have just begun the process of rising vs the Japanese Yen. USDJPY has carved out a bullish base since January which makes for an attractive case for why equities could see a bit further upside into the FOMC meeting.  Rallies back over 114.75 would set the Yen on course to test prior lows vs USD from last December (highs in USD/JPY) and the Dollar's gains should begin to accelerate upwards vs Yen given the uptick in momentum of late and improved structure. 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Healthcare correction imminent, while TY yields start to breakout of resistance

March 8, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2361-3, 2357, 2349-51, 2345       Support
2373-5, 2381-2, 2390-2, 2400-2   Resistance

 


S&P Futures: (2-3 Days)- Bullish- It still looks right to give the Bulls the Benefit of the doubt, as prices closed up above support at 2365 and now HOURLY TD COMBO buy are present.   While there are notable warning signs of breadth divergence & more stocks hitting new lows than highs, it still looks MORE likely in the short run that prices move higher to get above 2400.  Hourly close under 2361 as of Wednesday's trading could drive a bit more weakness, and should serve as a stop to half longs, with 2349 on the balance.  

SX5E- EuroSTOXX 50- Bullish- No change- Minimal weakness on Tuesday and prices have remained in sideways consolidation over the last few days, which should lead to an upside breakout.  The breakout last week should still help SX5E move higher up to near 3525.

HSCEI- Bullish- Tuesday's close at new 3-day highs should be the start of a push back higher for HSCEI, with movement over 10451 being particularly important for near-term prices.  The intermediate-term chart is quite constructive, so this is near-term only.  Pullback down to near 10100 or 10000 looks likely. 


Longs/Shorts for a 3-5 day period:  NO Change from Thursday

Technical Longs: EA, ATVI, AAPL, FAST, COL, UNP, HUM, CI
Technical Shorts: KORS, AN,  MNK, GILD, TSN, COST, SPLS, FOSL, HTZ,



TECHNICAL THOUGHTS


Tuesday's selling proved mild, and by end of day, finished above support at 2365 that would have signaled the start of perhaps a larger pullback to 2349-50 area.  At present, it's still right to give the Bulls the benefit of the Doubt.  Stocks like AAPL which carry huge weight in many indices continue to look quite strong technically, and Treasury yields look to be breaking out above important trendline resistance.  Both of these have positive implications for Technology and Financials respectively.  Until we see some evidence of this changing (and Treasury auctions might reverse this breakout.. we'll see) it pays to think further upside can happen into FOMC.

However, there was some evidence of stalling out in one sector that does have moderate implications for stocks.   Healthcare was the one sector that showed a large reversal of trend Tuesday given the GOP's Healthcare bill to replace Obamacare.  XLV fell to multi-day lows by end of day, violating the steep uptrend after prices had reached near-term resistance at $76 near last August's highs.  Stocks like ESRX, ALXN, MNK, REGN, UHS, MCK and EVHC all fell more than 2% and many still look to extend losses on Wednesday given prices in many cases finishing at their lows.  More on this with Chart and analysis below.

Finally, the Metals complex has been under substantial pressure of late with meaningful reversals of trend for Copper, Steel, Iron Ore and the Precious metals.  Gold slipped down under 1217 today and has been persistently weak given the uptrend in Treasury yields combined with US Dollar strength.  This looks likely to continue in the short run, and most would be wise to avoid the Metals as yields and the US Dollar trend higher.  Additional comments below.


Additional thoughts and charts found below

 


S&P fell back into the consolidation by Tuesday's close by a fractional amount, and did undercut Monday's lows, despite not breaking 2365 in March futures.  For now, it still looks premature to call for a larger pullback.  Factors such as sectors like Financials, Tech, Industrials, Discretionary still holding up well are important reasons to support further resiliency.  Additionally, Treasury yields attempting to breakout, as mentioned previously, should help Financials make further headway.
 

 

 


Healthcare's rollover given the introduction of the American Healthcare Act resulted in the XLV pulling back under the lows of the last week, closing at/near its lows.  This should result in further near-term weakness in this sector, and stocks which experienced the greatest weakness, such as MNK, ALXN, PRGO, GILD, all look to weaken further in the next 2-3 days, and are early to buy.  XLV is likely to fall to $73.15, or a maximum near $72.31 as a maximum area of support before rallying back.  For now, it's thought that this correction should prove short-term only.  While not shown above, the area at $76 is very important on weekly charts, lining up with last August's highs along with key trendline resistance over the last few years.  So both daily and weekly charts give compelling reasons why this is likely to retreat in the short run.  
 

 

Silver has been even weaker than Gold in the near-term, breaking its uptrend from last December and giving back 38.2% of the prior rally.  Prices closed at their lows yesterday, inviting even further weakness in the days ahead, and Technically its right to expect Silver to reach $17.15 at a minimum on this move.   Stocks like SLW and SSRI have both begun to rollover in mid-February and back off , and also look to experience further weakness.  For now, precious metals should be avoided, but silver is likely to move lower at a quicker pace than Gold.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Treasury yields arguably breaking out which bodes well for Financials strength

March 7, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2367-9, 2363-4, 2349-51    Support
2390-2, 2400-2, 2409-10    Resistance

 

 


S&P Futures: (2-3 Days)- Bullish- Prices continue to hover near key support at 2370 that marked the HIGHS of the consolidation over the last couple weeks.  While there are notable warning signs of breadth divergence & more stocks hitting new lows than highs, it still looks MORE likely in the short run that prices move higher to get above 2400.  Bullish stance looks correct with stops at 2365 on half then 2349 on balance

SX5E- EuroSTOXX 50- Bullish-  Not much change the last few days, and last week's breakout takes precedence.  Europe broke out of the highs of the consolidation that's been intact all year, and above 3360 turns the trend bullish, yet, similar to the US, also quite stretched.  Yet on a 3-5 day basis Europe is a bit more positive considering the range it broke out above was from early January.  This move yesterday should serve as a catalyst for continued gains up to test late December highs near 3524.

HSCEI- Bullish- Prices have begun to stabilize the last few days, and should push higher.   As mentioned, the intermediate-term chart is quite constructive, so this is near-term only.  Pullback down to near 10100 or 10000 looks likely. 


Longs/Shorts for a 3-5 day period:  NO Change from Thursday

Technical Longs: FXI, FAST, COL, UNP, YCS, DXJ, CVX, ALXN, HUM, CI, BIIB, EBAY, YHOO, WM
Technical Shorts: KORS, AN, TSN, COST, QCOM, SPLS, FOSL, TSCO, HTZ,



TECHNICAL THOUGHTS


The market's definitely starting to act a bit strange in ways that let most of us know that corrections are not too far off.  Breadth has begun to deteriorate, with pullbacks showing larger ratios of Declining vs Advancing stocks, and more NYSE stocks hitting new 52-week lows than highs.  The percentage of stocks trading above their 10-day moving average also has slipped from the mid-80%s to down near 60%.  However, the combination of Treasury yields attempting to breakout above key resistance, coupled with Technology's leaders like AAPL showing bullish option flows and acting well certainly seem to suggest that a bit more upside is still possible, particularly into FOMC in the next two weeks.  

Prices pulled back to key support near the prior consolidation highs and really haven't shown any meaningful signs of deterioration that would warrant a bearish stance.  Factors like waning breadth and momentum, bullish sentiment are certainly important.  Yet when not having much, if any effect on price, it's always wise to let prices turn down before acting to fade the rally.  For now, it's thought that yields can carry Financials higher and that Biotech can still be a source of strength for Healthcare in the short run.  For now, until price gives us ample proof that markets are heading lower, it's right to stick with stocks,  albeit with a very selective group.



Additional thoughts and charts found below

 


S&P has now pulled back to an area that should be good support to buy dips after reaching 2370 in March futures, which lines up with the highs of the recent consolidation.  It's thought that a push higher in AAPL might temporarily help Technology, despite weekly warning signs, while a yield breakout could aid the Financial sector, which combined represent over 1/3 of the market. 

 


Treasury yields look to be breaking out given yesterday's close in the 10-year yield at the highest levels since late January, but within a fraction of hitting new yield highs for 2017.   We saw some increased evidence of steepening across the yield curve Monday, and expect that 5's, 10s, 30's should all breakout of their recent ranges, no matter the degree of Treasury bearishness.   Following a further yield rally, one can look to buy Treasuries post FOMC meeting once price and time are more closely in alignment.  Daily closes above 2.5051 should result in upside acceleration to 2.65 and serve as a meaningful tailwind to Financials.
 

 

Metals stocks have been very hard hit of late, but are now coming into (what should be ) decent initial support to buy dips, which lies at $30.40-$30.75 right near December lows.   Steel, Copper and Gold have all shown evidence of attempting to reverse course lower in recent days, but the weekly trend for XME hits right near current levels, and was a very accurate gauge of support late last year on pullbacks to trendline support.  While a rising US Dollar will eventually be harmful to this sector as metals show even greater weakness, the near-term oversold conditions coupled with weekly bullish structure should allow for this to find support and turn back higher in the short run, from levels just below $31.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

XBI, OIH strength worth paying attention to

February 28, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2349-53, 2336-7, 2316-8, 2290-2      Support
2367-9, 2375-6*, 2390                       Resistance


S&P Futures: (2-3 Days)- Upside limited to 2375- S&P's move back to new intraday and closing highs could allow for brief upside into 2375 into early March, but would be hesitant to think much more upside is possible. It's tough taking a real bullish stance here as upside could prove brief, but would look to sell into gains at 2374-6 and then use movement under 2349 as a signal that a pullback is underway.

SX5E- EuroSTOXX 50- Bearish - The near-term remains negative despite Monday's minor blip higher.  Prices would need to get back over 3374 to turn the trend back to positive.  For now, TD sells were confirmed and should result in a move back down to near 3200. 

HSCEI- Bearish- The snapback rally into late last week proved to be a false move and now Monday's pullback to multi-day lows confirms the original counter-trend sells which were in place back on 2/16.   Near-term weakness down to 10100, or 10000 looks possible before a stabilization and bounce.



Longs/Shorts for a 3-5 day period:

Technical Longs: BIIB, CELG, VRTX,  TWX, EBAY, YHOO, WM, LRCXMAR
Technical Shorts:  TRIP, SIG, SPLS, FOSL, AN, TSCO, CSCO, ORCL, BBBY, KORS



TECHNICAL THOUGHTS


The stallout over the last five trading days failed to lead to any real downside.  Both pullback attempts on Thursday and Friday of last week proved short-lived and then snapped back to close nearly unchanged, well off the lows.  Yesterday's gains then lifted prices back to new intra-day and closing highs but on breadth gains of merely 3/2 positive while the DJIA notched its 12th consecutive gain for the first time since 1987.    Energy finished as the only sector to close up more than 0.50% while the Defensives backed off and weakened as Treasury yields rose marginally.   Overall, while this price action will eventually be corrected, it's tough making too much of this index price action as toppy, or stalling out based on overbought conditions alone.  While the individual sectors have shown some signs of wear of late, the indices have not yet reflected that, and at least SOME evidence of prices turning back down to lows is necessary before getting too negative.

One sector which continues to show impressive gains and snapback from last year's severe weakness is Healthcare, and in particular, Biotech which on Monday, vaulted back over prior highs to the highest levels since early last year.  Additional gains look likely to near 72, maybe 73, but shouldn't have too much more upside before stalling out, as the weekly chart is showing some minor evidence of exhaustion.  For now, XLV also looks to be closing in on a more serious level of resistance which is intersected from 2015 highs connecting last year's highs.  In the near-term, Biotech looks to still be a sub-sector to favor for a bit more followthrough this week after Monday's gains.

Elsewhere, bond yields backed up on Monday, while Crude oil finished above $54 and Gold flirted with early gains before finishing down as the Dollar rallied throughout the session.  Energy stocks led all other sectors with OIH showing nearly a 2% gain in trading.  While as reported early Monday morning in the Weekly Technical Perspective about the prospect for Energy gains looking promising, additional headway looks necessary before one can call the OIH move a breakout, even in the short run.  The trend from mid-December intersects near $34.21, which will be necessary to exceed to give this ETF a chance to extend.  For now, XLE looks to potentially be a better risk/reward than OIH, but the key point is that Energy should begin to turn back up higher , and looks to be an attractive risk/reward to overweight from a technical counter-trend perspective. 


Additional thoughts and charts found below

 


S&P extended gains once again, seemingly lifting out of this consolidation which had held prices range-bound for the last five trading days.   While Technology, Industrials, Financials have not yet lifted back to new highs, and is something to watch for in the days ahead, as to their relative success, or failure, the S&P move does look to have possible upside to 2375, just a bit above current levels.  One has to watch last Friday's lows for evidence that this move might be false and take prices back down below 2349.50.
 

XBI's pattern has improved in the near-term with Monday's move back over $70, which held gains last week, as well as last September.  This should drive prices up to near $72, with a maximum near $73 in the short run, and XLV is also likely to encounter resistance at levels just above current, sometime this week.  For now, this area of Healthcare should outperform with markets hitting record highs, and Monday seemed to suggest that could happen in the short run.

 

 

The Flattening of the yield curve is something to watch carefully in the days/weeks ahead which might put a damper on the Financials move. As indicated late last week, XLF confirmed a daily sell using TD indicators, and Monday brought about a bigger flattening in the 2s/10s, right at a time when the FOMC is trying to persuade the market regarding an upcoming rate hike.   The 2s/10s, 5s/10s, 5s/30s, and 10s/30s curves all look to have broken down to multi-day lows Monday, with the 2s/10s down to mid-January lows, an area of importance.  Getting below this would argue for additional flattening out from 114 bps to near 105.  However, it's important to remember that the 3-year downtrend in Flattening yield curves from 2013 took an abrupt upturn back in late last year, so much of this flattening remains short-term in nature only.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Industrials, Discretionary the first two to crack, as participation grows weaker

 

February 24, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2349-53, 2336-7, 2316-8, 2290-2      Support
2367-9, 2375-6*, 2390                       Resistance

 

 


S&P Futures: (2-3 Days)- Same as yesterday. Neutral until 2346 breached, which turns to Bearish Thursday's pullback rallied back by the close, and while there are a number of bearish factors concerning a dropoff in breadth, one can't short the index itself until yesterday's lows are breached on a close.  Upside looks limited.

SX5E- EuroSTOXX 50- Bearish - Closes Friday under 3312, or under 3339 by Monday's close would confirm Sell signals for SX5E, and should result in a move back down to near 3200. 

HSCEI- Bullish-  Structure still positive and minimal technical pullback last week has resulted in this challenging highs which could show some near-term upside follow-through.   US Dollar pullback in the short run should be bullish for Emerging markets for a bit longer- 2-3 weeks, and during that time, HSCEI likely outperforms and can move higher. 


Longs/Shorts for a 3-5 day period:

Technical Longs: BDX, YHOO, WM, INTU, LRCX, PM, VXX, GDX, GLD, SRE,  MAR
Technical Shorts:  TRIP, SIG, SPLS, FOSL, AN, TSCO, CSCO, ORCL, BBBY, KSS, KORS



TECHNICAL THOUGHTS


Increasing signs of a near-term top in place, which are evident by former leading sectors like XLI and XLY dropping to new multi-day lows.  While Technology and Financials managed to scramble back to near positive territory as of yesterday's close,  volume was more heavily weighted in DOWN vs UP stocks, and the VIX recorded its third straight day of gains.  However, the resilience of indices snapping back again doesn't give as much confidence to suggest Friday should be a big "down" day, and we'll need to see at least SOME evidence of prices pulling back to breach Thursday's lows on a close.   Until then, indices very well could attempt to press higher Friday, but would be led by fewer and fewer stocks, and for those that study internals, we're starting to see signs of breadth gradually waning while more stocks are hitting new 52-week lows now than two weeks ago, despite these new "RECORDS" for the indices being set every day.  Once we have price confirm this gradual sector deterioration, it will be right to expect a pullback, which very well could begin next week.

Looking at yesterday's trading, Thursday marked the first day in February where prices had pulled back under the prior day's lows, something which on a close would have given more confidence that a pullback could unfold.  Importantly, counter-trend sell signals have now been registered using Demark indicators but not confirmed in four sectors of significance to this rally:  Financials, Technology, Industrials, and Consumer Discretionary.  Of those four, only industrials confirmed a daily sell signal on Thursday's close.  However, for those studying Demark, his indicators had shown evidence last week of sells across the board for many indices, yet were conspicuously absent for most sectors.  Hence, there was good reason perhaps, why these sells DIDN"T work out last week.  However, at present, this seems to be an important piece of the puzzle which could lead to the actual drawdown, as these four sectors comprise around 60% of the SPX.  If Financials finally start to pay attention to what yields have been doing in the last few days, a pullback in this sector, along with Technology would have far more weight.

For now, we're seeing the Dollar index show signs of stalling on its advance, with USDJPY beginning to pullback in earnest again, while Treasury yields continue their near-term weakness.  Emerging markets and gold have flourished in this environment, yet both are getting close to areas to sell as we approach the month of March.  If the US Dollar index turns back higher as suspected next month, this would create a huge exodus out of commodities most likely, outside of Crude oil, which seems to operate on its own "animal spirits" these days. 

For now, as has been the case over the last week, one should exercise extreme selectivity when holding long positions in the near-term, as the market is beginning to look vulnerable, and would take only one hard and fast reversal day to suggest that a selloff is upon us.  Stops should be kept tight on longs, and avoid getting complacent in thinking this resilient market is averse to any sort of drawdown.  As the sectors and internals are starting to suggest, all these consecutive "GREEN" closes could be a bit of a mirage.



Additional thoughts and charts found below

 


Industrials showed their first real signs of weakness all month with Thursday's decline to multi-day lows, which confirmed TD Combo 13 Sells in the process yesterday.  Transportation was down nearly 1.2% and stocks like URI, FLS, GWW, CAT, TXT, R, FLR, FAST, CMI were all down more than 2% in trading.  This suggests that this sector has begun a topping process, and that one might consider hedging and/or adopting shorts, as further declines should lie ahead.  Gains back to the highs would serve only to trigger 9-13-9 patterns on weekly charts and wouldn't signify any larger breakout, but serve as a chance to sell into gains.  For now, this is the first real signal we've seen from a leading index (#3 out of 11 over the last six months, with gains of 10.24%, vs SPX gains of 8.09% through 2/23/17)  However, this strength has been hard to come by of late, and we've seen gradual signs of weakening in the last couple months that bears watching carefully. Yesterday's decline though, seems like a warning signal which could eventually lead to similar weakness in Technology, Financials and Discretionary (Retail related) 
 


XRT's downturn Thursday was sufficient to undercut the prior week's lows, making a test of recent monthly lows likely in the weeks ahead.  Retailing has faced relentless pressure since mid-December, and the intermediate-term pattern from last Spring doesn't appear particularly constructive from a technical perspective.  One should consider recent stocks listed as Technical shorts as ones to avoid and/or short technically, as this breakdown looks to extend, and many such as FOSL, BBBY, SPLS, TRIP, KORS, along with the others listed, remain above-average candidates for near-term technical shorts.  If and when the mild uptrend on XRT is violated, this would provide even greater signs of weakness, which for now, is premature.

 

 


Gold has neared its upside target after surging higher on the combination of lower yields and US Dollar Thursday, and prices now have retraced 50% of the entire decline from last July.   Counter-trend signs of exhaustion are close to forming on Spot Gold, while Gold is nearing the downtrend that extends from those prior highs.  One should consider using this recent thrust to lighten up on longs in the metal, as the US Dollar index's gains on an intermediate-term basis remain very much intact, and any signs of yields turning back higher would erase these recent gains quickly.  For now, we've recommended being long GDX and GLD in the last few "Daily Technical Comments" but would push to use movement higher into early next week to sell. 

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

 

NEWTON ADVISORS WEBSITE

 

 

Newton Advisors, LLC. info@newtonadvisor.com 203-339-2944

Market remains poor risk/reward for new Longs

February 23, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2348-50, 2336-7, 2316-8, 2290-2      Support
2363-6, 2375                                      Resistance

 

 


S&P Futures: (2-3 Days)- Neutral until 2346 breached, which turns to Bearish- Still a very difficult spot for S&P, as upside looks limited, but yet still very little to go on when deciding to short the market, as price trends remain resilient.  For now, extreme selectivity needed with any move back under 2346 being negative and confirmation under 2336. Above 2365 would allow for 7-10 points of upside to 2375.

SX5E- EuroSTOXX 50- Bearish - Gains up to near 3360 now look to be Gains should hold near prior highs at 3330, though no real evidence is present to suggest buying SX5E.  Over 3330 should allow for a brief move to 3365-75

HSCEI- Bullish-  Dollar starting to weaken a bit has caused a bit in many Emerging mkt indices, and HSCEI looks to be ignoring the Demark sells, similar to most of the world- Movement higher up to near 10700 looks likely in the short run-  A change of thinking short-term given the resilience of late


Longs/Shorts for a 3-5 day period:

Technical Longs: YHOO, WM, DD, PM, VXX, DXJ, GDX, GLD, SRE,  MAR
Technical Shorts:  TRIP, TSCO, FOSL, CSCO, ORCL, SIG, BBBY, KSS, KORS



TECHNICAL THOUGHTS


Not much change in US indices, and we've seen some minor catchup in Europe, as indices such as SX5E have pressed up higher to challenge last December highs (SXXP much higher) while the Dollar stalls out a bit and Treasury yields firm ahead of yesterday's FOMC minutes.  Overall, not much came of all this anticipation, and by end of day, the Percentage % chance for a March hike had lessened to 34% from earlier 38%.  As stated previously, given that equity weakness is overdue, any correction likely serves to further dampen hopes of a rate hike in March, and if a rising equity market , improving economic data, and hawkish Fed rhetoric can't do the trick to prepare markets anymore than a 1 in 3 chance, than it very well might not happen. 

At any rate, the technical picture remains largely unchanged, and factors such as overbought conditions, waning momentum, a resilient VIX, Counter-trend signs of exhaustion (Demark) and bullish sentiment, coupled with lackluster seasonal trends this time of year all seem to suggest that a pullback should be imminent.  However, sectors like Financials are continuing to press higher, despite some weakness in yields of late, and while seemingly close to areas of key resistance, will need to turn down to garner some conviction in the "market selloff" camp that this can in fact happen in the days ahead.   For now, Industrials, Financials, Tech, Discretionary have all gotten stretched and seem vulnerable, along with Healthcare, the latter which has outperformed all other sectors outside of Technology on a YTD basis, but seems to be nearing key upside resistance as per XLV (See chart, commentary below)

For now, despite the counter-trend sells in US indices and now Europe, we'll need to see evidence of US sectors registering these same signals and reacting, in the form of turning down to multi-day lows before paying much attention.  Defensive sectors continued to gain ground Wednesday, while the VIX has risen the last 2 out of 3 days, despite the indices resilience.  Overall, it pays to not get too complacent at this juncture, as when stocks start lower, as inevitably will be the case at some point, it will likely prove fast and furious.  For now, using Monday/Tuesday's lows of 2336/2346 as an area of importance, one can either use this area to cut long exposure, and/or short here with stops at 2365.   The thinking at this point remains unchanged.




Additional thoughts and charts found below

 


Healthcare's rally is getting close to exhaustion, with the XLV unlikely to exceed $75 after this big runup from late January, so the risk/reward for absolute longs is growing worse.  Biotech could have shown the first signs of this exhaustion with Wednesday's pullback to new multi-day lows, which violated a one-month uptrend.  For now though, this pullback looks premature, despite the trend break.  Counter-trend sells remain early to form, and momentum remains in very good shape.  Heading into Thursday/Friday of this week, any weakness down to $66-$67.50 should be used to buy for a challenge of former highs near $69.85, which likely does not hold and gives way to a bit more strength into the Spring.  The intermediate-term upside target for XBI technically lies near Nov 2015 highs at $73.80.  Near-term, this minor setback shouldn't prove too damaging for the subsector, and XLV still looks to also have a bit more to go on the upside. 

 


Energy's pullback looks to be close to hitting support which should allow for stabilization and a lift out of this group after a very dismal January/February for Energy.  Crude oil has held up quite well in the last few months, trading largely range-bound and showing some evidence of a minor breakout on Tuesday.  In relative terms, the OIH/SPX chart looks to be within 3-4 days of support, which translates into a likely buying opportunity for the group into early next week.  While Equities overall are due to see weakness, Energy looks to be a group to potentially favor from a counter-trend perspective, given that it's lagged all other 10 sectors on a YTD basis.   While still early for Thursday, heading into next week some opportunities will arise on the long side, technically speaking.

 

 


China's year-long breakout of its consolidation pattern went through just minor consolidation before rising again to challenge highs, and technically looks to be showing increasing signs of strength which could carry HSCEI up to near 10700 in the short run.  Pullbacks lasted all of just one day for HSCEI, followed by multiple days of consolidation until Wednesday's rally to the highest closing level since late 2015.  For now, it's tough to make much of HSCEI topping given the Demark signals failure at producing anything more than just a minor consolidation to this advance.  Longs are favored for the weeks ahead for the Hang Seng China Enterprises Index.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Crude attempts breakout, while equity indices reach stratospheric heights

February 22, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2348-50, 2336-7, 2316-8, 2290-2      Support
2363-6, 2375                                      Resistance

 

 


S&P Futures: (2-3 Days)- Tough being short here until 2349 breached.  Upside limited- Shorts stopped over 2356-  For now, no reason to consider that much has changed despite Friday/Tuesday's failure at turning back lower.  A Hit and Run approach is likely with no conviction in the indices to continue the trend much longer without at least a minor peak.  

SX5E- EuroSTOXX 50- Neutral-  Gains should hold near prior highs at 3330, though no real evidence is present to suggest buying SX5E.  Over 3330 should allow for a brief move to 3365-75

HSCEI- Stallout and downturn expected sometime this week.  9-13-9 pattern is present via Demark indicators and pullbacks look likely in the days ahead from an extended state.  A minor correction down to 10250 appears likely, but the breakout move overall is viewed as bullish, so one should look to buy into any weakness into early March, with key areas at 10250 and then 10090-10100.


Longs/Shorts for a 3-5 day period:

Technical Longs: VXX, DXJ, XBI, GDX, GLD, SRE, XLF, MAR, YHOO,AMZN
Technical Shorts:  TRIP, FOSL,SIG, BBBY, KSS, KORS



TECHNICAL THOUGHTS


Well, taking a bearish stance and trying to fight the trend regardless of the growing number of technical concerns proved to be premature.   While factors such as rampant overbought conditions, evidence of negative momentum divergence on multiple time frames, counter-trend signs of exhaustion per Demark indicators, excessive Stock market optimism, and bearish seasonality all came together to suggest we should be close to stalling out and beginning at least a minor pullback, price trends failed to confirm any of these factors.  As we know, price ITSELF is the most important indicator , and should be given far more weight than anything to do with breadth or momentum, sentiment or seasonality.  If price doesn't turn down to change the technical trend, than the trend remains bullish.   Certainly not a great risk/reward, but for the near-term, trends remain resilient.

As of yesterday's close, prices had moved higher during the day in such a fashion to "stop out" shorts by moving back above 2356 and then above 2360.  While this doesn't suggest equities have a lot more upside, it does make watching this trend for evidence of real reversals increasingly important.   Given the degree of overbought conditions at present, when the actual pullback gets underway, it likely should prove abrupt and swift.  For now, we'll need to see evidence of moving down under 2349 at a minimum at this point to think the bearish view is back on the front burner, and really a move down under 2336 would be much more convincing.  For now, trying to "Hit singles" and not getting caught up on trying to sell the exact highs without confirmation makes more sense at this juncture, given that last week's failed attempt. 

Heading into the last three trading days of this shortened week, overbought conditions are still an issue, and momentum is waning, as RSI is not as high as it was last week, despite price being higher.  Though still quite lofty (Current 14=period RSI on daily charts is now higher than what was registered post Election along with post Jan/Feb 2016 surge off the lows which drove breadth indicators to record highs)  Defensive sectors gained the most ground during Tuesday's session, while the VIX remains higher than where it traded back in late January, despite a 5% surge in Equites higher from those lows.   Demark signals proved to be potentially the biggest disappointment this time around, despite the overwhelming number of various completed Setups and Countdowns present on different timeframes which were all lining up to suggest a trend reversal was near.  This can still happen of course, but Tuesday's advance makes it necessary to have things line up again En-masse, and many look to be embarking on new uptrends on daily charts, while the weekly charts also require more work (i.e. Upside)   Monthly and quarterly signals are present in some indices, but as we've learned, without confirmation, most of these signals many time can prove "hit-or-Miss" .   Violations of uptrends, on the other hand, tend to be far more reliable, and can confirm what many of these warnings are suggesting. For now, unless an immediate reversal of trend occurs over the next couple days, the trend very well might push higher into early to mid-March


Additional thoughts and charts found below

 

ES.gif


S&P's push higher Tuesday was a bit surprising technically speaking, given the start of the prior stalling out post run-up which coincided with some of the highest RSI readings in years along with a completed TD Sell setup per Demark while momentum failed to reach levels of the prior week.  The one constant to lean on concerns the action in Financials, which has shown some good outperformance lately and remains premature in its counter-trend counts than the indices which largely have all lined up.  Given the lack of confluence in sectors this time around, this is another reason which largely serves to explain why reversals of trend weren't imminent.  For the final three days of the week, prices look very difficult to chase, and while 2375 is a possibility, the upside from here should prove limited.  Movement back under 2349 will be necessary at a minimum and then under 2336.  For now, being very selectively long within Financials and various parts of Healthcare remains prudent, while not looking to reach for the Benchmark indices
 

 

 


One positive technical development concerned the move in WTI Crude Tuesday, which moved to multi-day highs and at one point in yesterdays session, had risen to the highest levels since early January.   This went in direct opposition to what the inventory numbers might have suggested, while the OPEC compliance with the output cuts might have not been factored into prices to the extent they have occurred of late, which is certainly a bullish development in the short run.  Seasonality should also start to favor WTI moving higher in Q2, so the combination of these with price successfully breaking out above the one-month trend bodes well for gains in the weeks/months ahead before any larger inventory led decline.  Overall, Tuesday's move seemed telling as compared to most of the price action seen in the last few months and is thought to lead Crude higher. 
 

 

CRUDGOLD.gif

 

 


Crude, in its relationship to Gold, broke out of its own two-month downtrend on Tuesday, suggesting that Crude should be favored over Gold in the weeks ahead.   This relationship had been trending lower since December given the US Dollar's attempted decline.  However the stabilization attempt in the Dollar in turning back higher vs Euro, Yen and Sterling could have a bigger detrimental effect going forward on commodities.  For now, the metals seem to be backing off a bit given the Dollar's turn back higher, and if rates begin to break back out to the upside (TNX back over 2.53%) this would occur at an accelerating pace.  However, unless Crude's decline is immediately given back on Wednesday-Friday, this move above this two month trendline suggest that WTI should perform much better than Gold in the weeks ahead.

 

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Equities look to be stalling out, while precious metals can advance in the short run

February 16, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2332-3, 2316-8, 2290-2      Support
2348-50, 2355-7, 2360       Resistance

 

 


S&P Futures: (2-3 Days)  Bearish-  Yesterday's decline failed to gain too much traction, and prices stalled out near initial support on the uptrend from last week just below 2337.  For Friday, gains should be used to sell and a negative stance remains prudent, with movement under 2336 and particularly 2331 leading to the start of a move down towards 2300. 

SX5E- EuroSTOXX 50- Bearish- No change- Thursday's decline finished fractionally under Wednesday's lows, making additional weakness likely in the days ahead.  Upside looks limited and pullbacks to near 3280 look likely initially.  Gains should be capped near this 3330 peak, and over would allow for a brief move to 3365-75

HSCEI- Bearish- 9-13-9 pattern is present via Demark indicators and pullbacks look likely in the days ahead from an extended state.  A minor correction down to 10250 appears likely, but the breakout move overall is viewed as bullish, so one should look to buy into any weakness into early March, with key areas at 10250 and then 10090-10100.


Longs/Shorts for a 3-5 day period:

Technical Longs: VXX, GDX, GLD, SRE, XLF, MAR, YHOO,AMZN
Technical Shorts:  DAL, AAL, SIG, AN, BBBY, KSS, EEM, FXI, QQQ, KORS



TECHNICAL THOUGHTS


Markets look to be finally showing some evidence of stalling out following the S&P's pullback to retrace most of the prior days gains.  While prices rallied into the close, momentum has begun to stall, and would take just a move under 2336 to break this uptrend which would allow pullbacks down to challenge and break Wednesday's lows.  Equities remain overbought, while Demark counter-trend signs of exhaustion are present.  Additionally, seasonality starts to turn bearish tomorrow on February expiration, and the week following expiration in February typically is positive only around half the time.   In other words, the bullish seasonality for February expiration should now give way to a pullback which is typical in February following Elections.    For now, insufficient weakness was present on Thursday's close to suggest immediate acceleration, but extreme selectivity is needed for longs at this point given the degree to which momentum has become overbought and now stalling. 

Outside of Equities both the US Dollar and Treasury yields showed signs of fading Thursday and over the last few months have correlated quite positively with the S&P, particularly TNX and USDJPY.  Heading into Friday additional weakness looks likely in both, and this could serve as a near-term headwind for Financials while serving to lift interest sensitive sectors like Utilities and REITS even further in the short run. 

Gold looks to be primed for a final push higher given the movement of rates and USD as mentioned above, and the precious metals complex in general looks attractive on a 3-5 day basis to continue its recent advance.

Long positions in GLD, SLV, IAU, GDX look attractive between now and the end of February.

Additional thoughts and charts found below

 


S&P pulled back right to key trendline support , but will need to get back under 2336.75, Thursday's lows, or even better, under Wednesday's lows at 2331 before having definite conviction that a pullback is underway.  However, as mentioned previously, factors such as overbought conditions, Demark sells , sentiment and seasonality would all suggest a near-term change of trend should be imminent.   Momentum will begin to wane if prices start to languish, which looked to have begun at least partially on Thursday.  For now, a real trend reversal where rallies fail and then prices move down to new multi-day lows would be a definitive sign, which for now, remains premature. 
 


One important technical development for Thursday centered on the US Dollar index, which fell down under trendline support from early February, suggesting a deeper retracement in the Dollar's decline vs Pound Sterling, Yen and Euro is likely in the days ahead.   However, it's doubtful that DXY takes out the lows from early February given the extent of the momentum improvement in the last couple weeks.  The 120 minute chart above shows momentum nearing oversold levels already on yesterday's break.  A move down to 100 or 99.45 as a maximum level of support would provide a good entry for being long the Dollar again vs Euro, Yen and Sterling, which looks likely for the next few months as the Dollar moves back towards highs and EURO down to parity and below vs USD.
 

GOLD.gif

 

 

 


Gold's move back to multi-day highs reflects the combination of weakness in both the US Dollar and Treasury yields, and should help Gold continue its rise in the short run to briefly take out 1250 before resuming its decline.  For now, given that the Dollar decline looks temporary, it's also likely that Gold's advance fails to take out the larger declining trend which has marked its downtrend from last July.  In the short run however, gains look likely in Gold, Silver and in most mining stocks in the days ahead, which could strengthen on the Dollar's decline along with Commodities in general.  One should utilize this move to consider lightening up in Gold by March.  For now though, long positions in GLD, GDX, SLV, XME likely will work for the next 1-2 weeks.

 

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Financials continuing to provide tailwind, though upside remains limited, and poor risk/reward for new longs

February 15, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2332-3, 2316-8, 2290-2      Support
2348-50, 2355-7, 2360       Resistance

 


S&P Futures: (2-3 Days)  Bearish-  Wednesday's defensive stance looked premature given the followthrough in Financials, but prices are very stretched in the short run, and while difficult to be too Short here before the reversal happens, it's also a very tough spot for longs beyond 1-2 days, and upside still looks limited.  Traders can use 2360 as stops but expect a move down below 2300 to potentially 2280, so still about a 7/1 risk/reward from here and 2/1 from yesterday's close. 

SX5E- EuroSTOXX 50- Bearish- Upside looks limited following the push to challenge late January highs, and a much higher likelihood in the near-term of pullbacks down to near 3280 and below that near 3220. Upside should be capped near this 3330 peak, and over would allow for a brief move to 3365-75

HSCEI- Bearish- Signs of exhaustion are apparent for HSCEI, with Thursday marking an official TD SELL SETUP to this move from late January.  Pullbacks down to 10250 are likely, but the breakout move overall is viewed as bullish, so one should look to buy into any weakness into early March, with key areas at 10250 and then 10090-10100.


Longs/Shorts for a 3-5 day period:

Technical Longs: VXX, XLF, YHOO, GOOGL, NSC, MAR, AMZN
Technical Shorts:  EEM, FXI, QQQ, KORS, VFC, DV, SIG, KR, VZ, WMT, TAP



TECHNICAL THOUGHTS


The acceleration over the last few days seems to have caught most offguard, and indices ignored most of the negative momentum divergence signs from early Wednesday and charged higher another 0.50% while breadth moved up by just around 3/2 positive, not too encouraging for the bulls at this point.  Financials were doing much of the heavy lifting in yesterday's trading, but certainly an important sector to be moving higher at 15% of the SPX.  We'll need to see some evidence of this recent breakout in Financials stalling at some point to have some conviction of any sort of pullback.

For now the risk/reward is clearly poor technically speaking in the short run given rampant overbought conditions, signs of momentum not following suit, while there lies a plethora of counter-trend sells in place on many indices.  Yet, the signals were mostly just established YESTERDAY in SPX, NDX, CCMP, INDU, VALUA, and EEM, and still have not largely occurred in a few different important indices, such as the Russell 2000,  or many of the sectors outside of Technology.   Industrials is due to trigger counter-trend sells on Thursday, while several others, like XLF, XLV, XLY will still require another 2-3 days.  Other sectors, like XLE, XLB, XLU, IYZ, are down from recent highs and do NOT reflect any counter-trend sell. 

Bottom line, the seasonality this week traditionally IS positive while the Friday of February expiration and the following week tend to be a much more mixed picture.  Given the confluence of all these indices coming together showing very overbought conditions, any type of pullback might very well take a few more days before materializing, but the risk/reward for new longs here is Sub-par, and trading longs should utilize stops given the degree of parabolic advance which has occurred the last few days. 

Finally, interesting to point out that the VIX closed at the highest level of the month yesterday, rising over 11% in trading, which is an unusual move given the upside acceleration in the Financials.  Often times it is useful to look for signs of VIX resilience during a steep Equity market ascent for signals of an upcoming turn.  In this case, we'll need to see at least a move down to multi-day lows in SPX to have real conviction that this is getting underway.  Technically speaking, I would expect to see lesser and lesser participation in the days ahead, coupled with a drying up in volume and breadth, which precedes a pullback next week.  To reiterate yesterday's thoughts, extreme selectivity is imperative at this stage of the rally in the short run.



Additional thoughts and charts found below
 

Negative momentum divergence failed to stop prices from rising another 0.50% in Wednesday's trading, and the already overbought conditions became even more so by the close.    82% of stocks are trading above their 10-day moving average at present, which is on par with levels seen last December.  Meanwhile,  SPX prices have traded above their upper 2% Std Deviation Bollinger Band now for four straight sessions, while the monthly prices are above their Monthly Bollinger highs by nearly 3%.   Overall, getting back under Thursday's lows of 2331 in S&P futures is paramount to expecting that a move down to 2280-90 can happen, as this would also violate the minor uptrend in place from 2/8 lows, which is when the steeper ascent began.  For now, for those flat, look to sell into strength at 2355-7, and daily closes over 2360 necessitate holding out for better entries.
 

The VIX rose over 11% on Wednesday, a rare occurrence when we're seeing such parabolic activity while breadth is so flat/mildly positive.  For now, this should be a warning that this recent lift should be coming to an end, likely by February expiration in the short run.  One should use any backing off in Implied volatility to consider buying premium with thoughts that the weeks ahead could see some expansion in "VOL".

 

 

From a sentiment perspective, we've just begun to see other sentiment gauges start to line up with more bullish positioning, as the Equity Put/call recorded readings of .53 on Tuesday and actually lifted up to .58 during Wednesday's trading after hitting the lowest levels since mid-December.  Those former Extreme put/call readings happened after an 8-10% move in the SPX just following the Election, but the subsequent price action into year-end was anything but bullish, but resulted in extreme consolidation through year-end before the push up which we've seen over the last couple weeks.  Overall, this low Put/call reading is a warning that equity sentiment is getting more positive at a time when economic data seems to be also ratcheting up and the race towards a March rate hike looks to be on.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

 

NEWTON ADVISORS WEBSITE

Reversal looks imminent for US indices, while TY yields likely stall after rally

February 15, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2316-8, 2307-8, 2290-2      Support
2332-3, 2338-40                 Resistance

 

 


S&P Futures: (2-3 Days)  Bearish-  Prices have reached targets above 2330 as of Tuesday's close, and a pullback should get underway in the days ahead that takes prices down to 2293-5 and potentially 2281-3.   

SX5E- EuroSTOXX 50- Bearish-  Counter-trend sells are also apparent on daily charts of SX5E and should result in at least a minor pullback in prices in the week ahead, which could get down to near 3221 but probably not breach that level.  For now, upside looks limited.

HSCEI- Bearish-  Counter-trend sells also have cropped up in HSCEI daily charts and should result in prices backing down from elevated levels after the successful breakout earlier this week.  Pullbacks to near 10k can't be ruled out but would be an excellent area to buy dips.


Longs/Shorts for a 3-5 day period:

Technical Longs: VXX, XLF, YHOO, GOOGL, NSC, MAR, AMZN
Technical Shorts:  EEM, FXI, QQQ, KORS, VFC, DV, SIG, KR, VZ, WMT, TAP



TECHNICAL THOUGHTS


Tuesday brought about yet another push upwards, though far less impressive in breadth and magnitude than seen in recent days, with breadth barely registering positive.    While the Media talked about indices scaling further into new high territory (which was certainly true), prices failed to get up above targeted resistance on a closing basis, and registered an official "8 count' in this current Demark based Sell setup, which will now officially "perfect" this count as of Wednesdays close.   (Note, EEM and VIX also are showing completed Demark counts as of Tuesday's trading, suggesting reversals should be imminent)   In plain English, the counter-trend methodology that makes up at least part of the thinking of why equities will need to consolidate gains and selloff in the near-term looks to be now in place.   Confirmation of the sell itself in the days ahead, in the form of prices now making a close UNDER The close from four bars ago would go a long way towards thinking a short-term pullback is finally upon us.

As for Tuesday's price action, yet again we saw Financials make up the bulk of gains as the breakout in XLF extended ever higher.  This is a bullish sign on an intermediate-term basis (3-4 months), yet the group is overbought near-term, similar to the broader market.  However, this move is important this week given that Financials made up the bulk of the gains post Election and then went sideways for nearly 2 months before breaking out again this past week.   This constructive "flag" pattern should help to carry the group ever higher in the weeks ahead, despite the fact that momentum HAS gotten overbought.   Counter-trend sell signals for Financials are premature, and the group still lies 22% off all-time highs.   Additionally,  it's important to point out that Financials makes up nearly 15% of the SPX, so breakouts in this group are likely to serve as a tailwind for stocks in the next few months.  Therefore, while near-term selloffs are growing increasingly likely, they should prove to be short-lived given the resiliency of this sector.  

Yields pushed ever higher yesterday and accelerated a bit following Yellen's hawkish tone and the steepening of the yield curve and this bond selloff is directly coinciding with Financials strengthening.  While sentiment per CFTC "Specs" shows a distinct bearish bias that will eventually put a lid on how high yields can rise, (and yields as of Tuesday night's close look to be close as they hover just below 2.51%)   a move over 2.51% is expected into late Spring which in turn should fuel the Financials group, as XLF rallies over 25.   For now, near-term Yield resistance lies near 2.51% and should cap the 10yr yield rally, but pullbacks over the next 1-2 weeks should be an excellent time to consider buying dips into early March (Selling Treasuries and Buying Equities)  for an extended push higher into late Spring. 

Bottom line, to reiterate some thoughts from yesterday, it looks like a time to be very selective about what to buy and initiate as longs, and it's wise to be on the lookout for trend reversals this week, where prices push higher early on, yet fail and close down near the lows for the day or at a slight loss. 


Additional thoughts and charts found below
 

 


Tuesday's gains lifted prices to overbought levels, but momentum showed some definite signs of tiring, diverging from price in making a lower high which is a key warning sign that this lift is coming to an end sooner than later.  Trading short positions and/or hedges are recommended here, looking to sell further into strength if this happens on Wednesday, with ideal areas at 2343, utilizing any early strength to sell, and looking for signs of price backing off early highs to close down on the day at a loss, and near multi-day lows which would add some conviction that short-term highs are in place. 

 

 


The Financials group extended further on Tuesday, with the makings of a real weekly breakout this week, with prices trading as high as 2008, albeit a good 22% off all-time highs.  This "flag" pattern with the rapid acceleration post Election leading to consolidation and then a further lift up is a positive sign technically, and should lead to an equally strong rally in the group in the months ahead into late Spring.  For now, yields seem to be nearing initial resistance, and XLF itself is depicting Daily TD Sequential sells signals (though not confirmed) while TD Combo shows a 9, which would require another 3-4 days.  For now, it's thought that prices should still press higher early on Wednesday and even on some minor consolidation, would not nullify this week's breakout.  Pullbacks should provide better suited buying opportunities for another couple months of gains in this sector.  
 

Treasury yields seem to have neared their own level of initial resistance when eyeing 10-Year Treasury yields and the push higher in recent days.  This area at 2.51% marks a mild downtrend from mid-December which should have the effect of causing a minor stalling out in yields at a time when equities are likely to peak out and back and fill.  So, as might be expected given that both yields and stocks have moved in unison of late, we could see some stalling out and pullback in both in the next week before any further gain.  However, movement above 2.51% is likely to lead to an extended move which should test and briefly exceed last December highs, as the push towards a March rate hike continues.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Rally has reached nearterm resistance, & Poor risk/reward near-term

February 14, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2316-8, 2307-8, 2290-2      Support
2332-3, 2338-40                 Resistance

 

 


S&P Futures: (2-3 Days)   Flat, looking to sell at 2332-3 on Tuesday and go SHORT from a trading perspective for a move down to 2293-5 at a minimum but more likely 2281-3

SX5E- EuroSTOXX 50- Neutral-  Look to sell into 3330-5 for a stallout that could lead to sideways action and/or mild reversals of trend over the next couple weeks, and do not expect a move up above 3360 for now.   

HSCEI- Mildly bullish, but looking for short-term top by Wednesday/Thursday in HSCEI which should result in some consolidation to the recent rally.   



Longs/Shorts for a 3-5 day period:

Technical Longs: TBT, XLF, FXI, YHOO, GOOGL, NSC, MAR, LMT, AMZN, DOW
Technical Shorts:  KORS, VFC, DV, SIG, KR, VZ, WMT, TAP



TECHNICAL THOUGHTS


The breakout in S&P, and DJIA has coincided with a rapid breadth thrust that has helped many sectors accelerate in recent days, but appears to be nearing a short-term top that could be in place by today/Tomorrow of this week.  While the technical patterns are positive in indices (and will be tough to fight on an intermediate-term basis without a fair amount of technical damage) the near-term risk/reward isn't there for new longs and gains should be used to sell into by mid-week.

As mentioned in our recent Weekly Technical Perspective, the daily charts have begun to show a confluence of counter-trend sells based on Demark indicators that likely should be in place by today/Tomorrow in most US indices.   Momentum has gotten overbought and prices have pushed above the upper Bollinger band (2% Std Dev) on daily, monthly and in some cases a weekly basis also.  Meanwhile the Summation index shows readings nowhere near the prior highs from last Fall.  Implied volatility gauges such as the VIX meanwhile have ceased going lower in the short run, and even on Monday's surge, finished at higher levels than last Friday.  Thus, a huge ramp in Equities produced higher readings in the VIX, which often can signal near-term exhaustion is near for Equities.  Breadth for Monday came in around 3/2 positive, certainly not too encouraging, as most of yesterday's rallies were led by Financials, the only sector up over 1%. 

Yet , Financials certainly is a big part of the SPX and the combination of Financials, Healthcare and Technology all rising more than 0.50% certainly is constructive, as this amounts to more than 50% of the SPX composition.  Additionally, this Expiration week in February historically has been positive early in the week, while Expiration day itself is negative going back over the last 20 years along with the subsequent week.  Treasury yields, for now, continue to press higher and the rise in yield and the Yield curve is an important piece of the puzzle for the Financial sector.   The breakout in both the Russell 2k and XLF late last week did in fact follow-through yesterday, so both of these are certainly positive.  Yet, there remain sufficient issues with the near-term breadth, momentum and counter-trend sells to justify selling into this move mid-week, as seasonality trends for the month are far less robust than what this week shows.

Bottom line, it looks like a time to be very selective about what to buy and initiate as longs, and it's wise to be on the lookout for trend reversals this week, where prices push higher early on, yet fail and close down near the lows for the day or at a slight loss.  For Tuesday, it still looks likely that prices can push up slightly above 2330, but this should be used as a chance to sell into gains, as the risk/reward at these levels looks uncomfortably poor for short-term traders.


Additional thoughts and charts found below
 

 


Monday's rally lifted prices up to an area of attractive risk/reward resistance to consider lightening up in the short run, and the combination of overbought conditions, counter-trend sells, and heading into a period of sub-par seasonality in the weeks ahead makes this a difficult area to initiate new longs.  Look to sell into gains today into Wednesday, using 2332-3 as an initial spot to sell with stops at 2345 and targets down under 2300, with 2293-5 initially and then 2381-3 as being important.

 


The metals have certainly seen a surge of late and Copper, zinc, iron ore and Steel have continued to lift in recent days, despite precious metals falling off, given the combination of rising yields and the rising US Dollar.  For now the breakout in SLX is impressive from a technical standpoint, as the pattern showed a breakout of a Cup and handle pattern last Friday that accelerated yesterday as SLX moved up over $44.50.  Prices are overdone in the short run and will need to consolidate these gains, but targets lie up at $47.50 over the next couple weeks as a legitimate possibility for upside gains in SLX.  Above that, while not immediately expected, would lift prices up to near August 2014 highs just over $50.  Movement back under $42, while also not expected, would postpone any further advance for SLX. 

 

 


HSCEI extended its gains even further on Monday, hitting the highest levels since late 2015.  The Hang Seng China Enterprises index has near-term resistance at 10350, which is a 38.2% retracement of the entire decline from 2015, but upon some "backing and filling" further gains look likely and upside targets lie up at 10732 to 10850, which lies near the late 2015 highs.  FXI is an ETF which mimics this index closely a much more liquid alternative than when looking at the Shanghai Composite.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Rally nearing exhaustion- Use gains Friday/Monday to sell

February 10, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2292-3, 2284-6, 2273-5          Support
2310-2, 2319, 2325-7             Resistance

 


S&P Futures: (2-3 Days)   Mildly Bullish, looking to sell rallies at 2315 stretching up to 2325 and flatten out, awaiting signs of a reversal, which should be in place by early next week-  S&P is now up to within 10 points of targets, and risk/reward is not ideal for new longs-  While this could take another 2-3 days before prices turn down, one should consider taking profits from a trading perspective on gains Friday and into early next week.

SX5E- EuroSTOXX 50- Mildly Bullish-  Rally likely to stall in the short run just over 3300-3330, so use rallies to lighten up here over the next 2-3 days. 

HSCEI- Bullish- Rallies closing in on targets, but still no evidence of exhaustion & right to be bullish with targets directly overhead near 10209, which if hit in the next 2-3 days, would be an area to lighten up in the short run from a trading perspective- Overall though, this breakout is constructive-  



Longs/Shorts for a 3-5 day period:

Technical Longs: TBT, XLF, IYT,  FXI, YHOO, GOOGL, NSC, MAR, LMT, AMZN, GDX, DOW, LYB
Technical Shorts:  TLT, DV, KR, VZ, SPLS, WMT, TAP



TECHNICAL THOUGHTS


Thursday brought about fairly pronounced reversals in Treasury yields along with an abrupt About-face in Gold, while coinciding with a sharp breakout in S&P back above 2300, which was what technically looked to be the final push higher of this rally off the late December lows.  S&P and DJIA moved back to new all-time highs, while the NASDAQ continued ever higher.  Breadth came in at roughly 2/1 positive, disappointing on such a good technical breakout, while Financials were the sole sector to turn in better than 1% gains while both Utilities and Materials fell.   However, Energy Industrials and Discretionary all returned better than 0.50%

KEY TO NOTE:   Stocks at current levels aren't likely to continue up throughout the balance of February.  Prices have now reached the upper edge of 2% Std Dev Bollinger Bands while signs of upside exhaustion per Demark indicators are now in place.  Additionally, sentiment has begun to swing back bullish, as markets have ignored POTUS Rhetoric and concentrated on the positives of possible tax cuts, and optimism seems to be on the rise globally.  While the intermediate-term patterns remain in good shape, the near-term upside seems limited given some of these warnings, which coupled with overbought conditions and lackluster Breadth thrust in the last couple weeks, paints a picture of a market limping through the finish line.   While a move up to 2327 can't be ruled out, and we haven't seen any real evidence of trend reversals,  aggressive traders should look to sell into this rally in the next 2-3 days into next week, thinking that trend reversals are near, and would be ideal at 2315-25 to sell. 

Sector-wise, Biotech along with healthcare in general showed evidence of breaking out yesterday that could lead to higher prices, while Retailing also looked to have bottomed out In the short run after a steep decline.  For now, one sector that has NOT yet broken out again is Financials which should be watched carefully for evidence of this emerging and moving to new highs, along with the Small-caps, which have underperformed since December.  The chart of IWM looks not too dissimilar from Financials, both of which have trended sideways in the last couple months.  Overall, its thought to be doubtful that the market can experience any real peak without Financials and Russell 2000 joining the rally to some extent first.  The patterns aren't conducive to tops, so Financials in particular can be overweighted as yields turn back higher, which looks to have begun Thursday.



Additional thoughts and charts found below
 

 


Thursday's rally helped the S&P breakout, though also reach the upper limits of its rally off the late December 2016 lows.   While certainly a bullish technical move, momentum has gotten stretched, while prices have reached the upper border of the Bollinger Bands, suggesting that additional rallies from here into early next week should be sold.  For now, the trend is bullish, but looks to have limited upside in the short run.  Therefore, trends remain mildly bullish, but the risk/reward has gotten much worse for trading longs, and gains should be used to sell.

 


Biotech has finally shown evidence of breaking out after consolidating for the last few days near early January highs.  Thursday's move back above triangle resistance should help to lift this group up to test and exceed last November's highs just above $68.  In general, given that this triangle has been in place since last September, Biotechs should be a good risk/reward to strengthen in the days ahead, with stocks like BIIB, REGN and CELG appearing like good technical risk/rewards.

 

The Retailers have finally shown some signs of life after a dismal two months where this group got hit hard from early December.  Prices rose to new multi-day highs today in a fashion that lifted Consumer Discretionary meaningfully on signs of S&P breaking out.  While S&P is extended at current levels, this group is just starting to lift from oversold levels, so one has to be selective about what to short in this group at this point.  Rallies look more likely than not in the days/weeks ahead, as this group starts to gradually recover. 

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

China breaking out while the Defensives also showing good strength

February 9, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2284-6, 2273-5, 2260-2          Support
2294-5, 2298-2300, 2310-2    Resistance

 


S&P Futures: (2-3 Days)   Bullish-  S&P's undercutting of prior two days lows followed by a close up well into the prior days' range is a positive and should drive prices higher to 2298-2300 area.  Buy dips at 2282-4.

SX5E- EuroSTOXX 50- Mildly Bullish-  A mild bounce looks possible for Thursday/Friday but would need to get over 3282 to expect a larger move to test and exceed highs.  For now, the trend remains down, but rallies can happen solely based on Wednesday's rally back to the unchanged level from earlier lows.

HSCEI- Bullish- Movement back over 9910 helped create a breakout for HSCEI which should allow for higher prices in the days/weeks to come.  Rallies up to test last September's highs look likely at 10209, while movement over that level would be quite positive for the intermediate-term, leading prices up to near 10750-850.



Longs/Shorts for a 3-5 day period:

Technical Longs: EBAY, YHOO, GOOGL, NSC, MAR, LMT, AMZN, GDX, DOW, LYB, NEM
Technical Shorts:  DV, BBBY, FOSL, CROX, KR, VZ, SPLS, WMT, TAP, XRT, KSS



TECHNICAL THOUGHTS


Wednesday's drop to multi-day lows early on (which then led back to regain losses and close up moderately positive) reinforces the near-term bullish view that a rally back to new highs should happen first, preceding any type of correction.  While the Bears correctly point out that a low VIX is a potential concern and/or Investment Intelligence stats have widened out to dramatic levels between Bulls and Bears, (Investors Intelligence Bulls show highest readings since 2005, +62.7% Bulls,  while the Bears are the lowest since 2014) others like the AAII poll, still show more Bears than Bulls, not a resounding statement of Optimism.  This pessimism can be seen not only through Market polling, but when witnessing the anger and uncertainly felt by many are who are participating in Rallies and marches by the Thousands.   This kind of events look to rarely happen in markets where sentiment gauges are "off the charts" high and optimistic, like the Investors Intelligence survey showed.   For now, this resilience in snapping back price-wise bodes well for near-term strength, so we'll keep the bullish stance a bit longer.

The Following Key Developments look important to discuss: 
1) China's Hang Seng China Enterprises index broke out to the highest level since last September, exceeding a five-month downtrend
2) Gold rallied to within Striking distance of its 50% retracement since last July's highs while registering signs of exhaustion
3) Treasury yields both in US and in Europe fell to near key support, while also registering downside evidence of price exhaustion
4) Financials have sold off hard for the last two days, but remain range-bound since December, and now very close to support to buy at a time when yields could stabilize
5) Utilities have broken out on a daily close to the highest levels since last October, while REITS have also broken minor downtrends
6) WTI Crude oil continues to hang steady near the last four week's lows, despite very high inventory numbers per API
7) Small caps have underperformed, yet IWM, RTY have not broken down under support and also remain range-bound on absolute basis.


Additional thoughts and charts found below
 

A mild positive on Wednesday as S&P undercut the last two days lows while rallying back over the prior close from the last two days, roughly equaling the closing price from Monday.   This is seen as constructive, and certainly paints a much different picture than what was seen early Thursday morning when 2284 was initially broken.  Overall, this range remains very much intact, with 2283 on the downside and 2295 on the upside, but the resilience of late "should" lead prices turning back higher.  For the days ahead, getting above 2295 would be meaningful, leading to a test and breakout above 2300.
 

HSCEI, the liquid tradable index of China, broke out Wednesday above a meaningful trendline from last Fall which looks to have bullish implications for Chinese equities in the near future.  Targets lie initially up near 10209, but above, could experience a meaningful rally higher given the structural improvement while helping prices reach the highest levels since late 2015.  For now, this move is bullish enough to recommend buying/owning the FXI for further gains, and looking to buy dips if given the chance. 
 

 

Utilities made a meaningful breakout move back up above a range that's held for the last few months which would seem to suggest this group can move higher in the short run.  While a bottoming out in yields and upturn would most certainly be negative for the group, for now, this group along with the S&P Real Estate index have both turned higher and broken minor trendlines, and suggests that at least a bit more outperformance can happen in the short-run.  XLU could reach $50, but as always, important to keep focused on Treasury yields and signs of bottoming as yield and Utilities likely both won't work together for too long.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Metals continue to shine as yields slip, while Europe turns down relative to US

February 7, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2284-6, 2273-5, 2254-6, 2260-2    Support
2289-90, 2298-2300                      Resistance

 


S&P Futures: (2-3 Days)   Bullish-  Last week's breakout consolidated a bit on Monday, but maintains good structure and Demark counts are premature- a move back to new highs is likely before any peakout

SX5E- EuroSTOXX 50-  Bearish-  Europe has taken the lead in turning down ahead of US and weakness in SX5E, DAX, IBEX, FTSEMIB all look to have a bit more downside near-term.  SX5E got down to near last week's low close and 3230 will have importance, under leading to 3187

HSCEI- Neutral, as prices have reached the highs of the recent range, while not exceeding 9910 which would turn the trend bullish.  Under 9632 would be a concern, while over 9910 lets this move extend.  


Longs/Shorts for a 3-5 day period:

Technical Longs: GDX, DOW, LYB, NEM, AMGN, BAC, ABT, KMT, URI
Technical Shorts:  S, VZ, CCI, SIG, SPLS, WMT, TAP, HRL, XRT, KSS, BBBY



TECHNICAL THOUGHTS


Monday's minor pullback failed to do much damage in S&P with prices barely giving back 1/4 of last Friday's gains, while the NDX pushed up to new highs for the month and within 1 point of all-time highs.  Incredibly enough, Monday marked the 35th straight trading day without a 1% intra-day swing, which looks to be a new record as stocks continue to churn with incredibly low volatility.  Breadth was lower by a 3/2 margin while volume flowed at over a 2/1 pace into Down vs Up stocks, yet by end of day, none of the major 11 sectors were down more than 1% and both Technology and Industrials were higher.   While many continue to warn of low volatility preceding a likely range breakout which occurs on big downside volume, it's still tough to make that case, and movement back to new highs looks likely this week for S&P, DJIA and NDX before any reversal plays out.   Demark indicators which show counter-trend exhaustion for weekly and monthly charts remain premature for daily, and when scanning many equity and sector charts, most require another 3-4 days higher before producing any signal.  So, despite some sentiment indicators starting to tilt more "bullish" again, it's proper to wait until we see proper upside exhaustion and/or begin to show some evidence of technical damage.

Key developments for Monday were focused on three things:  First, Precious metals extend their recent breakout and still look likely to trend up in the next few days, despite being stretched.  This should constitute the final part of this push higher in the metals before the US Dollar turns back higher.  For now, the move seems incomplete and Gold, Silver look likely to move to 1250 and 18 respectively.   The second development concerns the movement in Treasury yields lower which began last week in Europe and has slowly extended to the US which showed 10-Year Treasury yields pulling back to under 2.41%.  This does look near-term bearish for yields and could lead to additional minor weakness down to 2.30-2% before bottoming out.   For now, sentiment remains bearish on Treasuries with Specs still holding -297k Short contracts in Treasuries, expecting yields to move higher on faster US economic growth.  For now, last week's FOMC dovishness seems to be leading Treasuries higher.  Unless yields take out 2.32% though, this move should be faded on pullbacks and used to sell Treasuries over the next 3-5 trading days.

The Third development concerns Europe beginning to show markedly greater weakness than US equity indices, and DAX, SX5E and SXXP all look to be potentially forming topping patterns in the short run, which needs to be watched carefully for any evidence of US following suit.  For now, it looks right to favor US stocks over Europe, expecting that Europe begins to slide and show more underperformance in the days/weeks ahead.  ETF's like EZU, VGK both have begun to turn lower of late, hitting new multi-day lows, while the ratio of EZU/SPY just broke down under key trendline support in the last few days.  Overall, for now, it seems right to stick with the US, expecting higher prices, yet to expect weakness out of Europe.  While this can last a bit longer in the near-term, it's thought that eventually the US will follow suit, but not before another attempt at new highs in SPX, DJIA and NDX this week.






Additional thoughts and charts found below
 

This hourly S&P shows the resilience in S&P futures holding the area right near prior 2/1 highs, which is a key area of structural support on a short-term basis.  Movement back to new highs is the more probable near-term scenario, and above 2294 should drive prices back to new all-time highs.  UNDER 2284 would take prices to 2274-6, but only in the event of a break of 2262 would the structure truly turn negative.  Until/unless this occurs, it's better to follow the trend from late last week which still points higher. 
 

Treasury yields have begun to pull back in the near-term, with Monday's decline to new multi-day lows definitively breaking the trend from early January.  Additional near-term weakness is possible in this scenario, which might prove to be a short-term source of strength for Utilities, REITS while Precious metals can advance a bit higher.   Movement down to 2.32-4% looks possible in the next few days, but is likely to hit yield support which causes stabilization, and then yield rallies unless 2.32% is breached.

 

 


Europe took a big step lower in relative terms to the SPX in recent days, and as this ratio chart of EZU to SPY shows, broke the uptrend that had been intact since the US Election last November, while adhering to the intermediate-term downtrend that's been in place for years.  Bottom line, this looks to be a place to underweight Europe vs the US, and expect to see above-average lagging in most European indices as compared to US equity indices.  Technically speaking, one should look to favor SPY, QQQ while avoiding EZU, VGK in the days/weeks ahead.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Precious Metals, insurance, Staples lead as equity indices hold key levels again

February 3, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2262-3, 2254-6, 2260-2, 2246-8     Support
2281-3, 2289-90, 2298-2300          Resistance

 


S&P Futures: (2-3 Days)  Mildly Bullish-  4 straight days with prices well up above intra-day lows still favors this consolidation being resolved by a move higher.   UNDER 2262 on a close merits caution.

SX5E- EuroSTOXX 50-  Bearish-  Pullback to multi-day lows is not a positive, and could result in short-term weakness for SX5E.  However, prices aren't likely to fall under 3150, 100 points lower which should be support and help SX5E stabilize and attempt to move back higher.  For now, this is a ST bearish development.

HSCEI- Neutral, turning to bearish on a move under 9671.  Above 9881 is short-term bullish.  For now, no evidence of any real downturn, just a stalling out, so will continue to respect this recent move.  


Longs/Shorts for a 3-5 day period:

Technical Longs: KIE, AMGN, DXJ, BAC, ENDP, ABT, TECK, KMT, URI, MTB
Technical Shorts:  SIG, WMT, TAP, MNST, HRL, XRT, PRGO, KSS, BBBY



TECHNICAL THOUGHTS


Very minimal net change by Thursday's close as the markets trudge into February, a notoriously difficult month seasonally for Equities in post-election years.   S&P yet again attempted to move lower, yet by end of day, had regained all its losses to close at a fractional gain.  In fact, the last four sessions have seen the S&P futures contract close UP 11, 6, 12,  and 13 points respectively from intra-day lows, which is roughly 1/2 Half Percent, on average.  Meaningful rebounds daily, while testing support from early January and failing to break.   No change in outlook based on yesterday's resilience, which if anything, adds conviction that this 2262-4 area is quite important for S&P futures.   As in previous days, it's right to be long vs this level as a stop on a closing basis, thinking that prices push higher.

Key developments concerned three key technical moves:  First, the US Dollar fell to the lowest levels since last November when eyeing the DXY, the US Dollar index.  Dollar/Yen fell to Tuesday's lows, but is set to finish at the lowest weekly closing level since November and looks vulnerable.  Precious metals, meanwhile, rocketed higher, as Gold initially broke out above prior 1223 highs before settling, but is still set to close at the highest weekly close with one day remaining since mid-November as well.  Additional gains look likely for both Gold and Yen (USDJPY goes lower) in the short run as the Dollar stabilization and rally still looks a bit premature. 

Second, Defensive sectors have begun to lift, with Utilities and Consumer Staples attempting bounces over the last couple days, with Real estate also lifting.  Some of this has to do with defensive positioning while the other strength looks purely interest rate related.  For now, this rally in these groups should prove short-lived for the time being, and technically looks good to sell into as the global bond selloff doesn't look anywhere near complete in the short run.

Third, Financials have not really shown much weakness, which is important to note, given that Treasury yield rallies look to have stalled a bit in the near-term.  XLF has been literally unchanged since early December, but on weekly charts, continues to resemble a "flag" formation, which could lift higher up to $25 or so before any real drawdown.  So the 1% declines seen Thursday in KRE, KBE, and XLF really haven't done much, if any real damage.  For now, the combination of a resilient tape, decent leadership and good breadth overall (Advance/decline near highs) should outweigh the near-term seasonality concerns coupled with a bit of stalling in short-term breadth.


Additional thoughts and charts found below

 


This daily chart shows how many consecutive days S&P has now rallied substantially off its lows.  While momentum is starting to wane given the initial failed rally into late January, from a price perspective, this pattern remains constructive and should allow prices to move higher to test former highs before any meaningful pullback gets underway.  Pullbacks under 2262 in Futures (2267-SPX cash) would change this thinking and allow for a minor drawdown to get underway for February.  

 


Gold's breakout attempt failed to close above where it needed to on a daily close Thursday, but remains well positioned to make further progress and will still (at current levels) finish at the highest weekly closing level since November.  Additional upside progress to 1240-55 looks possible before gold turns back lower.

 

 


Amazon's post close drop down to 802 post close represented more than a $30 dollar drop from closing levels, or roughly 4%, as revenues missed expectations despite turning out more than 43 billion in Revenue for 4Q.  The near-term pullback should be buyable between 790-805 given the presence of former highs from November along with meaningful retracements of the prior rally which should serve to cushion declines.  AMZN's drop fails to change the technical structure too dramatically and it remains well positioned for a move up to $850 and then $885 which would be a 100% extension of its rally from 2015.  Heading into Friday, it's difficult not to see AMZN find support and turn higher technically given the sudden drop within the ongoing bullish structure.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

NASDAQ breaking out vs SPX a mild positive, as Tech continues to lead

February 2, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2262-3, 2254-6, 2260-2, 2246-8             Support
2277, 2281-3, 2289-90, 2298-2300     Resistance

 


S&P Futures: (2-3 Days)  Mildly Bullish-  Despite the minor stallout, willing to stay bullish above 2262, thinking that a push higher can happen, largely based on technology. Pattern though on hourly charts does suggest a minor pullback could happen into Thursday unless 2277 is recouped.  For now, it doesn't look serious.  Above 2287 on a close should lead higher above 2300 to 2315.  UNDER 2262 on a close merits caution.

SX5E- EuroSTOXX 50-  Bullish-  Favor a snapback to 3300-10.   The decline thus far hasn't taken too much wind out of the sails and unless 3230 is breached on a close, still right to favor a rally back.

HSCEI- Neutral, turning to bearish on a move under 9671.  For now, no evidence of any real downturn, just a stalling out, so will continue to respect this recent move.  


Longs/Shorts for a 3-5 day period:

Technical Longs: AMGN, EW, DXJ, BAC, BCS, ENDP, ABT, TECK, KMT, URI, MTB
Technical Shorts:  WMT, TAP, MNST, HRL, XRT, PRGO, KSS, BBBY



TECHNICAL THOUGHTS


Markets continue to demonstrate a real sense of offbeat rotation which seems to keep prices afloat while different sectors take turns leading, allowing the broader indices to stay afloat, amidst uneven lackluster breadth data.  Wednesday saw prices attempt to follow-through on Tuesday's resilience, which looks largely to have failed, yet prices didn't really show much change, outside of the continued rally in Technology.  Treasuries rallied shortly after the FOMC meeting, which managed to take the wind out of the sails from Financials, while the Dollar index managed a mild comeback.  Overall, with Technology and Healthcare both rallying and Financials "hanging in there", It's truly difficult to be all that negative on stocks, despite Wednesday's data coming in less than stellar.   Utilities and Real Estate both lost over 1%, and the general theme looked to center around Yield sensitive stocks losing ground, despite rates not making much upside progress in the US.  Overseas was a different story, however, with breakouts in the Spanish 10-year, following suit on what happened to Italian 10-year yields, and the net effect of all this global bond selling seems to still focus on Financials gaining ground and/or not losing lately while the Defensive sectors remain under pressure.

The net effect for stocks continues to paint more of a positive than negative picture, with Technology leading every sector outside of Materials, but still turning in a strong 4+% for the month.  Stocks do look to be tiring, yet with Financials, Tech, Healthcare holding up, and yields moving gradually higher with economic data growing stronger amidst a subdued sentiment picture, we'll need to see more proof to turn bearish.

Additional thoughts and charts found below

 


While many areas of the market have indeed begun to show signs of fatigue, one quick look at the NASDAQ goes a long way towards showing us why this market continues to hold up amazingly well.  NDX managed to hold where it needed to Wednesday, and traded well up off its lows, finishing within striking distance of former highs with a very steep ongoing bullish pattern of higher highs and higher lows.  Until something about this picture changes, (that being a move down under Tuesday's lows near 5100 for starters), the trend remains bullish and looks to extend back to new highs.  The S&P certainly is more choppy and much less upwards sloping.  However, for now, the NDX should likely lead both on the upside and also downside.  Failure to get meaningfully above former highs in the next week which turns back down below 5100 would certainly be addressed.  For now, long positions are still recommended.

 


NASDAQ vs SPX has just broken back out to new highs, something which is important and bodes well for stocks in the near future given the pattern breakout which relatively speaking, resembles a Cup and Handle pattern.  Additional near-term strength is likely for the NASDAQ Composite and NDX vs SPX

 

 


Apple's earnings (AAPL) certainly caused some excitement Wednesday, pushing the stock back up to within striking distance of 2015 highs.  The stock has tended to move in 26-27 week cycles over the past few years, with Declines from 2/23/15-8/24/15,  7/20/15-1/20/16, 11/4/15-5/12/16, and 4/13/16-10/12/16 all spanned 26-27 weeks in length, while other Low to Low and Low to High relationships focus on 8/24/15-2/21/16, 2/24/16-8/22/16, along with 5/12/16-11/16/16 all being similar duration.  Looking forward, extrapolating these times from highs on 10/11/16, and/or lows from 11/16/16 projects out to 4/11/17 and 5/17/17, which both stand to have some importance if these relationships hold.  Additionally, it's worth noting that the stock peaked nearly two years ago at the same level and bottomed last year near this same date, so the period in late February certainly appears important for AAPL and the fact that it's rising into a two-year anniversary near the same price makes this doubly important from a price/time standpoint.   For now, I expect AAPL to stall out and potentially reverse at end of month between 130-135 and any sharp movement into the dates mentioned in April and/or May likely could provide a turn. 

 

Healthcare's rally should continue further as this group continues to gain ground

February 1, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2262-3, 2250-2, 2246-8             Support
2281-3, 2289-90, 2298-2300     Resistance

 

 


S&P Futures: (2-3 Days)  Bullish- Prices undercut 2280 and 2273-6, but managed to rally back to hold 2276, putting the correction for now still in doubt and making a long bias still right- Above 2282 should add conviction that S&P can move higher, and lead back to 2300 and above.

SX5E- EuroSTOXX 50-  Bullish- Monday's decline to new multi-week lows was definitely more negative than positive, yet prices lie on the outside of Daily Bollinger bands, and better to use rallies to sell vs thinking we extend from here.  Favor a snapback to 3300-10.     

HSCEI- Neutral- Prices have risen to near resistance, yet show no evidence of counter-trend sells, and might meander sideways a bit more until we can see evidence of breakouts or breakdowns, which for now, seem elusive.



Longs/Shorts for a 3-5 day period:

Technical Longs: XBI, DRG, DXJ, BAC, BCS, ENDP, ABT, TECK, KMT, URI, MTB, UPS, TBT
Technical Shorts:  WMT, TAP, MNST, HRL, XRT, PRGO, KSS, BBBY



TECHNICAL THOUGHTS


Overall, prices fell down to key make-or-break support and held up miraculously well yet again.  Tuesday's breadth was far better than that seen on Monday, even when the DJIA was down 180 with hardly any more Declining issues than Advancing.   Momentum dipped on hourly charts, but didn't nearly reach prior lows, creating a level of positive divergence as price hit new lows while momentum was higher.  Bottom line, the larger area of support formed by SPX, NDX over the last few months ended up holding again by the close as prices rallied well off early lows.  Until we see evidence of this breaking, it remains difficult to assume too much of a bearish stance. 

Healthcare remains in focus given Tuesday's rally to multi-day highs in DRG, BTK, and Medical Device ETFs like IHI, and the recent outperformance looks likely to continue in the days ahead.   Trump's mention of Drug costs was thought initially to be a source of turmoil for the Healthcare sector, though recent efforts to help reduce regulation seem to be more positive than negative.  This group's improvement from the worst performing sector last year to a market leader this year IS in fact due to some mean reversion type bounce, but looks to be ongoing as this group continues to show improvement.  In performance figures through 1/31, Healthcare was tied with Utilities (looking at SPX GICS Level 1 groups) for best performance in the rolling five day period, while being the 4th best performing sector out of 11 for January.   Overall, additional outperformance looks likely in the weeks and months ahead, and particularly in Biotechnology given the continued resilience in US Equities, as this sub-sector remains in much better shape than most other parts of Healthcare, despite last years decline.

The Decline in the US Dollar extended to the lowest level of the year Tuesday, undercutting mid-Jan lows and hitting the lowest levels since early December.   It looks to be temporary given the bullish weekly and monthly structure, so dips should be used to buy, thinking that this pullback is nearly complete.  Monday's gains attempted exceeding resistance near 101 and failed, so now important for the Dollar to hold 99-99.45.  Overall a bottoming process should be in force for the US Dollar and movement back to highs to complete the 16.5 year cycle which could carry the DXY up to 110 into late Spring before a larger peak. 





Charts and analysis below.

 

 


S&P's daily chart above highlights the picture heading into mid-day, when S&P fell down to near 2260 in Futures before rallying into the close.  This level had some importance given the trendline which had been intact for some time and going forward, one should utilize Tuesday's lows of 2262 as being a key level to stay above.  Any pullback at this point back under would likely prove to cause downward acceleration.  On the upside, climbing back above 2284 will be key.
 

 


Biotechnology has been steadily improving in recent months, with charts of XBI showing a pattern of higher lows in place since late last year as the sector has grinded sideways in a triangle pattern that should eventually lead higher.  Tuesday's close at multi-day highs is a step in the right direction for Bulls and should lead up to test and exceed early Jan highs at $65.87.   If this is exceeded, which is likely as a form of pattern resolution, it should lead to the high 60s, which would make investing in this sector quite compelling at present.
 

 


Medical Devices ETF.. IHI, has just exceeded former highs from mid-January at $140.92,  making a continued surge higher likely in the weeks ahead.  This group has shown steady strength through tough times from September into November of last year, similar to most of the group.  Yet its rebound has been far stronger and bodes well for continuation up to 146-150.  Pullbacks could happen over the next 2-3 days just considering the degree of the lift yesterday, but would be buying opportunities, and doubtful that 139.40 is broken before a move up to 145 and above gets underway.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Selloff failed to do sufficient damage, but pays to be vigilant over next week

January 31, 2017

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2262-3, 2250-2, 2246-8             Support
2281-3, 2289-90, 2298-2300     Resistance

 


S&P Futures: (2-3 Days)  Bullish- Prices undercut 2280 and 2273-6, but managed to rally back to hold 2276, putting the correction for now still in doubt and making a long bias still right- Above 2282 should add conviction that S&P can move higher, and lead back to 2300 and above.

SX5E- EuroSTOXX 50-  Bullish- Monday's decline to new multi-week lows was definitely more negative than positive, yet prices lie on the outside of Daily Bollinger bands, and better to use rallies to sell vs thinking we extend from here.  Favor a snapback to 3300-10.     

HSCEI- Neutral- Prices have risen to near resistance, yet show no evidence of counter-trend sells, and might meander sideways a bit more until we can see evidence of breakouts or breakdowns, which for now, seem elusive.



Longs/Shorts for a 3-5 day period:

Technical Longs: DXJ, BAC, BCS, ENDP, ABT, TECK, IYT, KMT, FDX, URI, MTB, UPS, TBT
Technical Shorts:  WMT, TAP, MNST, HRL, XRT, PRGO, KSS, BBBY



TECHNICAL THOUGHTS


Overall, tough making too much of Monday's pullback just yet.  A few things to consider:   First, S&P DID in fact break near-term support, to pullback into the prior consolidation range, yet rallied by the close to finish back above, and closed near the highs of the days range, after nearly climactic type volume flowed early on into Declining issues.   The more important support at 2251.75(SPh7), 2257 (SPX) was not broken.  Second, the NASDAQ, which might be expected to lead the broader market, failed to show much weakness whatsoever, holding the uptrend from early January while closing well up off its lows.  Third, Treasuries showed little to no real bid today and yields finished barely unchanged from levels hit last 1/25 when Yields closed at 2.51(now at 2.488).  Fourth, Financials and Technology maintain fairly attractive daily charts, having shown little to no damage in the last couple days and could easily find their way back to new highs in the days ahead.  Fifth, counter-trend signals of exhaustion are not yet present on daily charts of S&P, nor NDX and also are not present on XLF, XLK, nor on stocks like FB and AMZN, both which report earnings this week.  Sixth,   sentiment seems to suggest a mixed picture, with subdued levels of late which occurred into and following Trump's inauguration.  The ongoing uproars, and marches taking place around the world might seem ironically too negative, sentiment wise to think a top of any magnitude could take place

What remains a concern:  First, seasonality suggests that the month of February historically is quite sub-par following Inaugurations   Second, momentum has gotten overbought, and now is starting to wane a bit, which was expected during the sideways consolidation, but Percentage of stocks trading above their 50-day ma failed to jump on the recent breakout and remains lower than levels hit back in early January, not to mention December.

Overall, while the decline was larger than expected to start the week, by end of day, little true damage had been done and sectors like Financials still reflect attractive technical "flag" patterns that should result in prices moving back to highs.   If in fact prices pullback to violate last week's lows (made Monday 1/23) that would indeed change the near-term picture.  For now, many seem too quick to jump onboard with thinking the "Trump rally" has run its course, while uptrends in most major indices remain intact.   Overall, enough is out there to suggest this might be a false move and could lead back to new highs.



Charts and analysis below.

 

ESH7h3.gif


S&P Monday's drawdown was more severe than expected, and but negative breadth improved slightly by end of day to show just slightly worse than 2/1 negative, while Volume remained very strongly positioned into Down vs UP stocks at around a 4/1 ratio.   Prices hit 2261 on futures, just slightly above key support near the lows of the consolidation from early January, but did so on sufficient force that momentum fell to quite oversold levels on hourly charts.  By end of day, RSI had risen from 14 to over 36, suggesting that any drawdown from here should create positive divergence and be buyable.  Prices did manage a late day recovery effort , and lie just below initial resistance for tomorrow, which intersects at 2280-2.  Breakouts back above this level are certainly possible given the resilience of most of the key S&P sectors.  Only in the event that 2251 is violated would this stance need to change.

 

 

Financials continues to portray a very bright picture with regards to its technical pattern and the flag formation doesn't show the kind of topping formation that Monday's weakness might have suggested should be the case if stocks were going to turn down.  Unless prices undercut 22.85 in XLF, and yields begin to show more signs of topping (also not the case), then Treasury yields likely lead higher which in turn should carry the Financials.   Rallies over 24.50 look likely before any peak, and should provide a near-term tailwind to the broader market.

 

 


Energy has sold off to areas of key near-term support, and while WTI Crude has languished in sideways consolidation over the last month, Energy has been particularly weak, the second worst performing sector in 2017, with only Telecomm showing worse performance.  Near-term, the ratio of OIH to SPX has sold off to important trendline support.  Bottom line, this "should" be an area to take a stab at buying this sector, as it maintains the relative uptrend from last Fall and Crude has not broken down as some have suggested.  Stocks like HAL, NBL, VLO, TSO, SLB look particularly attractive from a technical perspective within Energy.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.