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US resilient, while MSCI All World EX-US hits new lows for the year

August 17, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
280.16-280.44, 279.11-279.16, 276.73, 275.43    Support
285.40, 285.98, 286                    Resistance


LINK TO TECHNICAL WEBINAR from yesterday, 8/16/18- https://stme.in/L3MxzJPlkq

 

SPX - (1-2 Days)- Bullish over 2843- Bearish Under 2825- Shorts stopped yesterday on broad-based gains over 2843- Mildly Bullish with plans to sell 2865-75.  UNDER 2825 puts bear case back on front burner, leading to 2755;  Similarly, breaks of 7600 and 7100 for NASDAQ comp and NDX would be important

SX5E- EuroSTOXX 50Bearish-  No reason to expect anything more than just a minor bounce out of Europe which remains far more negative than anything seen in the US at present.   The early week support violation in Spain's IBEX and German DAX looks important. SX5E has now given up more than 50% of the entire rally from late June.  Expect weakness down to 3340 initially near late June lows.    

HSCEI- Bearish- Minor bounce should prove short-lived and still expect a final pullback on this recent decline down to test 10188 given that August lows were breached.  

Trading Longs: SQ, MNST, MDT, LH, WELL, VTR, VER, VNQ, EXC, AEE, ES, LYB, CVNA, NEP, HRTX, UNH

Trading Shorts:  WHR, MHK, SF, MAR, WYND, FEZ, VGK, AVGO, DE, ITW


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XLU with targets at 55
Long VNQ with targets at 85.50
Long XLP with targets 54.60-55, Stop at 52.95


US stocks managed to hold important support and then turn up over the last 3 days highs (SPX) on much better then expected breadth, which signals that yet again, it's likely premature to bet against US Stocks and selloffs could be postponed yet again barring an immediate move back down under SPX-2825.   Those looking to sell rallies should concentrate in Europe and Asia until the US can demonstrate more signs of weakness.    Movement up above 2843 is a temporary positive given the sharp gains seen iin  broad-based fashion, with yesterday representing the 4th best breadth day all year.  As discussed previously, momentum and recent breadth (ex-yesterday) along with seasonality and ongoing divergences in US indices and US vs Europe/Asia remain key concerns.    The positives focus on A/D trending near all-time highs, lack of High Yield stress, sentiment and technical structure.

Sector-wise the move in the Defensives continues to suggest this area should be one to favor, particularly heading into September in the weeks ahead.  REITS and Utilities have been acting well, and if WMT's move yesterday was any guide, the Staples have also been showing excellent outperformance of late.  Whether or not the Tech rally can continue another 1-2 weeks is not of interest given the lofty levels, and Industrials and Financials strength should prove short-lived.   In Commodity-land, meanwhile the rallies in the Metals and Energy continue to face headwinds given the rising Dollar, and despite a minor stalling out in the USD, there simply hasn't been sufficient weakness to have any real confidence in precious metals stocks and/or oil services to show any real strength.  While a commodity rally is likely in the month ahead, for now, this still looks premature and patience is required.  

One thing to watch for in the days ahead:  If Yields start to turn higher in greater fashion, this very well could lead Financials up into late August before a peak and turn back lower.  As charts and commentary will show below, there are now counter-trend signs of Bond yields potentially bottoming and turning back higher in the near-term.  However, given ongoing structure and negative sentiment towards Treasuries, this likely proves temporary.   

 

Additional charts and thoughts below.

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SPX broke back above the prior highs on some of the best breadth of the year yesterday, with very good participation.  Yet, daily charts show this to be an ongoing choppy consolidation since early July where bounces have met with resistance and turned down, while selloffs also have not gained traction.  While a move over 2843 doesn't represent an immediate technical reason to sell, one should be on alert given the declining momentum, and consider that trends generally might prove trendless for the time being.  ClearlyThursday was more positive than negative, yet technically the market remains one to be selective and tough to have too much conviction as indices navigate a very negative time seasonally when most of the world is moving lower.  The area near late July highs will have some importance, but it still looks doubtful that S&P makes much headway above January highs.  Bottom line, unless reversed right away on Friday, one should look for opportunities into end of month. 
 

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Both German Bunds and US Treasuries showed some evidence of some stabilization in yields over the last couple days, and the counter-trend exhaustion in yields could allow for a bounce between Friday and end of month before any further bond rally gets underway.  As reported last week, sentiment remains quite bearish for Treasuries and the positioning continues to be very negative and growing more so by the week.  Thus, an eventual break of this "neckline" for yields looks likely as markets enter September.  However, for the next couple weeks, one can't rule out a rally in yields, and selling Treasuries here with yields at 2.87 looks right with initial targets at 2.92 and above allowing for a push higher in yields up to 2.95-8 area before yields stall and turn back lower.   

unnamed (28).gif

 The MSCI "All World-EX-US" index has just fallen to new lows for 2018 and the lowest level since early last year.   Given that the US and the World index were moving in tandem into early January, this recent divergence shows the extent to which the US has diverged "big time" in the last couple months.   This index represents an index of stocks globally without the US included, driving home the point yet again of the glaring divergences now present between the US and the rest of the world.   For now, this is more of an intermediate-term warning than anything that suggests the US needs to play catchup to the downside, but should be paid attention to in the weeks ahead.

Further near-term weakness likely for US stocks, though pullback likely proves mild compared to Europe/Asia

August 16, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
280.16-280.44, 279.11-279.16, 276.73, 275.43    Support
282.83, 283.87, 285.40, 285.98, 286                    Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 8/9/18- https://stme.in/9aXI6EKv6o

 

SPX - (1-2 Days)- Bearish- Decline under 2820 early this am paved the way for a test of 2800, and insufficient signs of the late day bounce making much headway, so by the close, the trend from late June had been violated.  Another revisit and break of 2800 looks likely which if undercut, leads to 2755;  Similarly, breaks of 7600 and 7100 for NASDAQ comp and NDX would be important

SX5E- EuroSTOXX 50Bearish-  Break of suppport in Spanish IBEX and German DAX looks important, and Europe still showing far more signs of weakness than US.  SX5E has now given up more than 50% of the entire rally from late June.  Expect weakness down to 3340 initially near late June lows.    

HSCEI- Bearish- Break of early August lows likely leads down to 10188.   Initial move down to 10188 looks likely

Trading Longs: WELL, VTR, VER, VNQ, EXC, AEE, ES, LYB, CVNA, NEP, HRTX, UNH, MDT

Trading Shorts:  WHR, MHK, AEM, FCX, ESV, SDRL, SF, MAR, WYND, FEZ, VGK, LVS, WYNN, CZR, NOC, AVGO, BABA, BIDU, CAT, DE, ITW


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XLU with targets at 55
Long VNQ with targets at 85.50
Long XLP with targets 54.60-55, Stop at 52.95


US stocks showed their first real evidence of trying to join the weakness being seen in the rest of the world.  SPX violated 2820, sending prices down to near 2800, while DJIA finished Under early August lows.  Bonds rallied with 10yr getting close to initial support at 2.82%, while both Crude and Gold showed evidence of further weakness.  Breadth, which started out near 4/1 negative, steadily improved throughout the session, but yet still didn't make it past -2.5/1 negative

Bottom line, I do not view this selling as something that should lead to a broader contagion for US stocks.  While negative factors like 1) Momentum divergence 2) Divergences to Europe/Asia 3) Minor breadth dropoff DID all suggest that stocks might be vulnerable, along with 4) mid-term August seasonality, there remains inconclusive proof that the EM stress is spreading to the US.  The following are seen as positives and likely limit the extent to which equities fall in the next month.
 

  1. "All Stocks" Advance/Decline line still within striking distance of new highs (New highs in early August)
  2. No evidence of Credit trouble. If anything, high yield has remained fairly calm over the last few weeks. High Yield typically will turn down in advance of Stocks
  3. Sentiment could turn bearish pretty quickly given the Tariff threats and now EM stress as a 1-2 punch.  Thus far, the Turkish situation seems to be idiosyncratic and not as source of systemic risk.  
  4. Long-term trends are still in good shape for most, if not all US Equity indices and sectors, and no real intermediate-term trend breaks

 


Additional charts and thoughts below.

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SPX broke near-term support at 2820 Wednesday, causing a quick test of 2800 within a few ticks. While prices did rise a bit into the close, the damage looks to have been done, and can lead to additional weakness to revisit the area near early August lows near 2791 up to 2798.  A break of 2798 on a close should pave the way for an eventual test of 2755 which adjoins the larger trend from April and would be more meaningful.  The US looks to be slowly joining some of the weakness seen in many other parts of the world, yet still has yet to show too much damage. 

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Advance/Decline for "All stocks" still hasn't shown hardly any real deterioration from the highs that were put in , in early August.  Historically when examining the top Bull market peaks of the last 100 years,  equity markets tend to show a 3-6 month decline in breadth in advance of any major market peak.  This time around, this has been largely non-existent.  The only two occasions in the last 100 years where breadth failed to turn down meaningfully in advance was 1946 and 1976 where prices moved right from the highs and began a bear market.  So for this recent churning, the A/D largely has stood its ground, and indices require a lot more signs of weakness to have too big of a bearish intermediate-term stance given the lack of actual trend damage.
 

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 The Bloomberg Barclays Option Adjusted Spread, or OAS, shows High yield in relatively good shape, not showing the same degree of stress that one would think would be the case given the EM currency crisis starting to spread.  While JNK and HYG have weakened since last year, this is largely been an interest rate move, while High yield has been relatively well behaved thus far.  When the spread of High yield to 5-year Treasuries gets above 3.75%, this will be a bigger deal in thinking that credit is widening.  Based on historical precedent, this would then likely be problematic for equities.   For now, credit being in good shape means near-term equity weakness likely is buyable over the next few weeks

Retailing breaking out to new highs; US still ignoring global equity weakness for now

August 15, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
282.86, 281.83, 280.28, 279.16, 275.43    Support
284.54, 285.40, 285.98, 286                      Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 8/9/18- https://stme.in/9aXI6EKv6o

 

SPX - (1-2 Days)- Trend will be mildly bullish until/unless 2820 is broken.  Do not expect move above 2863, or to exceed January highs before a stallout. Sell rallies at 2853-5.  Decline under 2820 turns trend bearish, with immediate move to 2800 likely, and potentially 2755;  

SX5E- EuroSTOXX 50Bearish-  Italy, German, Spain look to have held support initially, but rebounds should be used to sell with max rally to 3460.  SX5E has now given up more than 50% of the entire rally from late June.  Europe is an ongoing underperformer vs US.  Expect weakness down to 3340 initially near late June lows.    

HSCEI- Bearish- Break of early August lows likely leads down to 10188.   Initial move down to 10188 looks likely

Trading Longs:  XRT, M, GES, BOOT, CONN, CVNA, HRTX, TEAM, YEXT, VICR, TNDM, EXC, AEE, ES, LYB, UNH, MDT

Trading Shorts:  WHR, MHK, AEM, FCX, IQ, BILI, RDC, DO, ESV, SF, MAR, WYND, FEZ, VGK, LVS, WYNN, NOC, BA, AVGO, BABA, BIDU, CAT, DE, ITW


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XLU with targets at 55
Long XRT raising targets to 54, with stops raised to 50.50.
Long XLP with targets 54.60-55, raising stops to 52.75


The uptrend for SPX is intact for now, as the selloff held after four days and managed to bounce in Tuesday's trading.  The move in Technology did not turn down yet as planned, and this remains a large part of how to view this market these days.  While XLF and XLI have turned lower, with some evidence of Transportation also starting to wobble, Tech has not yet followed through sufficiently on the peak made on July 25, and still lies within striking distance of those highs.  While the threat of further Emerging market selling can't be ruled out with the strong Dollar, this move is getting extended and looks to be on its last legs for now.   Overall, when viewing the XLK charts, one can certainly make a case for a final push up to briefly exceed late july highs, which should prove to be sellable given the declining momentum trend since June.  For now, under 70.32 is truly what's needed to violate the trend from April higher in Tech, and until this happens, the trend has stalled, but has not been sufficiently weak just yet to have confidence in shorts.  But Selectivity is key at this stage.

The key worry at this stage has to do with momentum having become steadily weaker over the las tmonth.   The SPX chart along with NASDAQ, XLK and many others demonstrate visibly the reasons for concern about this rally.   Furthermore, sectors like XLF and XLI have both broken down at a time when many were counting on broad-based movement back to highs.  

Additional charts and thoughts below.

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SPX has held where it needs to for now, so the pattern remains choppy since late July, with evidence of negative divergence as part of the uptrend from late June.  Movement in the next 1-2 days could face some stalling out at 2853-5, and above near late July highs near 2863.   Any pullback will have critical support at 2820 and under this allows for an immediate pullback to 2800, and/or under to 2755. 
 

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Retailing still looks to have upside given yesterday's push up above 2015 highs.  Countertrend signals of exhaustion should be complete within 1-2 weeks, but as of now, are premature.  Additional upside should occur within Retailing between now and late August before a stalling out and pullback in September.  Bottom line, this pattern still looks far too positive to consider fading and selling into this rise, and it's right to stick with Retailing and favor further near-term gains before this move has reached completion. 
 

 Industrials, along with Financials remain weak and have trended lower from late July.  This could be problematic at a time when US markets have tried to ignore the selling happening globally.  Trendlines from late June have been broken in both Financials, and Industrials, as seen in XLI breaking down three trading days ago.  Momentum indicators like MACD have broken down below the signal line and are negative, and any minor rally that happens in the next 3-5 days likely would be a chance to sell into this move. 

Global markets look to be near make-or-break; Reversals in XLF, XLI important

August 14, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
281.19, 280.28, 279.16, 275.43    Support
283.58, 284.90, 285.97                 Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 8/9/18- https://stme.in/9aXI6EKv6o

 

SPX - (1-2 Days)- Bearish- Under 2820 allows for pullback to 2798-2800- Sell rallies to 2843

SX5E- EuroSTOXX 50Bearish- Breakdown of Italy, Germany, Spain in recent days down to key levels bears watching carefully for evidence of these indices breaking-  Expect weakness down to 3340 initially near late June lows.    

HSCEI- Bearish-  Two separate rally attempts since early July look to have failed.  Pullback does not seem to have run its course, and initial move down to 10188 looks likely

Trading Longs:  M, GES, HRTX, EXC, AEE, ES, TLYS, LYB, DWDP, SA, UNH, MDT

Trading Shorts:  WHR, MHK, TPR, AEM, IQ, BILI, RDC, DO, ESV, SF, MAR, WYND, WATT, FEZ, VGK, LVS, WYNN, NOC, BA, GE, GM, AVGO, BABA, BIDU, IQ, CAT, DE, ITW


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XLU with targets at 55
Long XRT with targets at 52, with stops at 49.50
Long XLP with targets 54.60-55, raising stops to 52.75


Initial rally attempts for US averages look to have failed and yesterday's close brought S&P down to important make-or-break levels near 2820 which connect the trend from April.   Under this level should bring about a quick move to 2798-2800.  At the close of trading though the price action was far more bearish than bullish, yet multiple indices were still holding support both in US and abroad.  S&P has not yet broken its uptrend, despite being under the first key support at 2833.   European indices like Spain's IBEX, or the German DAX have fallen to very important levels, as has the Italian FTSE MIB index, making the next couple weeks of critical importance for these indices to hold and try to turn back higher.   

Unfortunately the move in Financials, Industrials and Transports might have tipped the market's hand, as each of these had attempted to breakout over the last couple weeks but failed and now turned down to multi-day lows as of Monday, violating one-month trends which had held throughout July.  So, while S&P and NASDAQ still haven't shown all that much weakness, the sector indices seem to be fading.  In addition, sectors like Healthcare which had rallied throughout much of July and outperformed sharply in the month of July have now begun to rollover, violating key uptrends.   Most of this suggests the US market is likely on borrowed time, and even if some mild rally happens that helps the indices stay afloat over the next couple days into August expiration (which according to Stock Traders Almanac this week is the most likely period in August for a rally - between the 8th and 13th day of the month, which has stood the test of time over the last 20 years.)  However, the month of August overall has had a dismal record in mid-term election years over the last 50 years, so markets should be in a time-zone when its right to be defensive, and lower prices are expected between now and October, either occurring into end of August, or in the month of September.  But US indices are slowly but surely showing some evidence of stalling out and slowly rolling over to join some of the weakness being seen abroad.  

The movement in the US Dollar will be key as to whether commodities can start to turn higher in the days ahead, and whether Emerging markets can attempt any type of rebound.  The movement in DXY seems to be near key resistance, but the MXEF index looks to have a brief move back to new low territory before this can bottom.   Many EM currencies have broken down, outside of just the Turkish Lira and we're seeing many world equity indices weaken thus far, far more than the US.



Additional charts and thoughts below.

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SPX has pulled back under 2833 on a close, but is sitting near the uptrend line support from late June that could have some importance.   While markets could stabilize here for Expiration week, the action in Sectors with the deterioration seen, makes it right to favor a breakdown in this trend, and pullback to support near 2800 initially.   The larger area of trendline support on SPX daily charts lies near 2755 and should be important if and when prices manage to break 2800.  Overall, while downside is likely to prove limited for US indices into the Fall, most markets are increasingly showing a heightened risk that a pullback should now be approaching.  US markets likely can only avoid weakness abroad for so long. 

Financials, along with Industrials, Transports all look to be breaking back down after failed rally attempts above June highs.  This chart looks important with regards to the reversal, not only for Financials, but for these other sectors as well, and likely results on weakness in the days/weeks ahead.   Yet again, this move up into the first couple days of August looks to have been a false move, and the fact that prices undercut last Friday's lows is seen as a technical negative in the short run.  

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 The breakdown in Emerging markets can be clearly seen in the daily chart of the MSCI Emerging markets index, which violated the one-month rally attempt in this index, making a pullback to test and breach June lows likely for a final pullback of the larger decline which began back in late January.   From an Elliott perspective, many might view this move as the start of wave 5 of this correction, so it still seems a bit premature to buy into this decline, and additional weakness looks likely over the next 3-5 weeks for Emerging markets.  

Technology, Financials near tipping points as Equities reach 6-month point from Jan peaks

July 27, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
282.91, 282.49, 281.47, 276.28-.52, 275.62         Support
283.93, 284.53, 285                                              Resistance


LINK TO TECHNICAL WEBINAR from yesterday-  https://www.youtube.com/watch?v=YoiTNDUL7As

 

SPX - (1-2 Days)- Bearish-  Technology should be in the process of peaking and risk/reward looks poor for Equities into next week at current levels.  However, trend will need to show more damage for any sort of meaningful pullback to get underway.  Still avoiding Tech and Financials, favoring Healthcare and Energy-  UNDER 2879 would lead down near 2800.  Today should prove important for a change of trend.  The next 24-48 trading hours should shed some light as to the effectiveness of thins scenario.  

SX5E- EuroSTOXX 50Bearish-  Prices have been rallying for a full month and now just below Triangle resistance from late January.  Expect stalling out and downturn in SX5E- 3650 is a stop for Shorts

HSCEI- Mildly bearish-  Pullback possible after 4 straight days of gains and evidence of bottoming process at work.  expect some backing and filling, but this is likely buyable into next week

Trading Longs:  VXX, QID,  SOXS, DG, K, XOP, NBIX, LLY, BAX, AEE, TSG, TWLO, SSTI, TIF, BURL,VEEV, KFY, ETSY, ACN, ADP

Trading Shorts:  SMH, ON, LRCX, AMAT, ON, LUV, ALK, AAL, GE, VOD, VIAB, NFLX, FITB, EBAY, XLK, OIH, MDR, SMH, AMBA, PCAR EWJ


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XRT with targets at 52, with stops at 49.50
Long XLP with targets 54.60-55, stopping out under 52.07
Long XLV targeting 89, and raising stops to 86.35

Short IYT, with targets at 185, stops at 195.90
Short XLF with targets at 26-26.50 and stops above 28.20 on a close (CLOSE)

Short SMH with targets at 96.10 & stops on shorts at 107.84- Press shorts under 103.71
Looking to buy Gold at 1200-1210 late this week, and buy GLD at 113.50-114.50

Upside should prove limited-

The Equity trend has been positive for a full month.  Just in the last couple weeks we've seen evidence of breadth non confirmation and some signs of Technology stalling out, most notably with Semis and FANG stocks turning lower (FB, NFLX taking the lead, while AMZN is UP in after-hours trading Thursday thus far) Investors have pressed their bullish bets as sentiment has grown increasingly more positive, while today lies 180 calendar days from our January peak, a cycle that can't be taken lightly given the degree of importance in the high from late January.   While DJIA has followed through higher, above June highs in the last couple days, we've seen sectors like Financials and Industrials both get up to key areas of trendline resistance.   Overall, it should be right to sell into Tech, Financials and Industrials Friday into next week, while favoring Energy to follow-through higher and also increasingly favoring commodities to work again after a dismal June and most of July.   Counter-trend Sells appeared after Wednesday's close in the S&P 500 Information Technology sector (Demark) and while this still needs to be confirmed, the upside for Tech after this recent snapback looks poor from a risk/reward basis.  

The key technical catalyst which should be watched carefully in the next 24-48 hours is whether Treasury yields start to turn down sharply, as this has occurred prior to several other market pullbacks.   Financials have reached "DO-or-DIE" resitsance, and should likely stall out and turn down as well.  While AMZN is up in post-market trading on Thursday, the stock had shown quite a few signs that gains could prove limited near-term, so keeping an eye on this for possible reversals in Technology and continued pullbacks in Discretionary also looks important.  Overall, the next 3-5 days does not seem ideal to press long bets, but longs should be still concentrated largely in Energy and Healthcare.  


Additional charts and thoughts below.

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AMZN Technicals-  Upside likely proves limited from here-  Amazon charts are showing the same warning signs that were present in Facebook prior to earnings.  (AMZN post earnings was higher in trading, but the key will be as of Friday's close)   Evidence of negative momentum divergence, counter-trend sells and extreme overbought conditions were present heading into AMZN earnings Thursday.  We have seen a distinct slowing down in the stock since mid-July, so further upside from here might prove difficult technically.   Bottom line, while the stock remains trending higher and in an uptrend (and Yes.. fighting trends is often not for the faint of heart), the risk/reward looks poor and one could consider selling with plans to buy back technically on pullbacks to 1647, with breaks of the eight-month trend leading down to 11607 or below to 1567.

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Technology reversal seems near-  Can AMZN manage to hold its post-market gains on Thursday, or should this stock reverse- Technology showing some evidence of trying to peak out-  The next 1-2 days will be important in confirming this, but it looks right to sell into many Technology stocks, with thoughts that the S&P 500 INfo Tech index pulls back to near 1250 from its current 1290.  Semis, as mentioned in yesterdays' report, should also be vulnerable, despite Thursday's lift in the group. 

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 Treasuries look like a BUY between now and mid-August-  Treasury yields have reached areas that should allow for a pullback in the days ahead.   10-YR YIELDS managed to successfully form TD SELL SETUPS, the same formation that occurred at the prior highs back in May when yields dropped precipitously, and should also be at a crossroads where further yield gains prove difficult.  This could set the stage where Financials also turn down, with XLF up against former highs at key trendline resistance.  So a reversal in both yields and Financials is what to watch for between today and early next week.  I like buying Treasuries here, expecting yield pullbacks to near 2.83 at a minimum, with preferred targets down near 2.76%. 

Facebook plunge could be the catalyst for broader Setback- AMZN key

July 26, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
278.41, 276.28-.52, 275.62         Support
282.57, 283.53, 283.75-284,       Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/lnSOjY8ZbO

 

SPX - (1-2 Days)- Bearish-  Shorting into this recent rally makes sense Thursday into next week, as FB likely set the tone for a broader market pullback, and AMZN due out Thursdaypost close likely should provide further clues.  UNDER 2879 would lead down near 2800.  As told previously, key turn date lies at 7/26-7, and rallies into this time should find strong time-based resistance
  
SX5E- EuroSTOXX 50Bearish-  Expect stalling out and downturn in SX5E- 3650 is a stop for Shorts

HSCEI- Mildly bearish-  Pullback possible after 4 straight days of gains and evidence of bottoming process at work.  expect some backing and filling, but this is likely buyable into next week

Trading Longs:  VXX, QID, FB (160-70) THC, NBIX, LLY, BAX, AEE, TSG, TWLO, SSTI, TIF, BURL,VEEV, KFY, ETSY, ACN, ADP

Trading Shorts:  SMH, ON, LRCX, AMAT, ON, LUV, ALK, AAL, GE, VOD, VIAB, NFLX, FITB, EBAY, XLK, OIH, MDR, SMH, AMBA, PCAR EWJ


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XRT with targets at 52, with stops at 49.50
Long XLP with targets 54.60-55, stopping out under 52.07
Long XLV targeting 89, and raising stops to 86.35

Short IYT, with targets at 185, stops at 195.90
Short XLF with targets at 26-26.50 and stops above 28.20 on a close (CLOSE)

Short SMH with targets at 96.10 & stops on shorts at 107.84- Press shorts under 103.71
Looking to buy Gold at 1200-1210 late this week, and buy GLD at 113.50-114.50

Upside should prove limited to 2835-45 for S&P Futures-  S&P got to the upper part of this range yesterday before reversing sharply post close on Facebook woes, (FB lower by 23% at 7pm Wed night) and with two of the four FANG stocks now lower (FB, NFLX), with AMZN on deck for Thursday post close, it seems like the market is getting closer to a time when the beloved FANG stocks don't serve to garner all the attention (which will come about by a meaningful pullback in this group)  As we all know, the Advance/Decline did push to new all-time highs into 7/9-10 on a larger rally than just "FANG", with Small-caps, Mid-caps and Equal-weighted S&P showing strength.  Yet the last two weeks have been lacking for real leadership as Tech has shown some signs of stalling relatively, while Discretionary, Russell 2000, Airlines, Semiconductor shares, and Financials remain under pressure.  The breadth dropoff in the last two weeks has been noticeable for those paying attention, and it's thought that a combination of poor breadth/momentum along with complacent sentiment, seasonality and time cycles all can lead to stocks making a minor top into late July, as opposed to thinking earnings carry stocks back to highs right away. Wednesday's post close FB drop might have been a catalyst, but it's important to see the other importnat index constituent, AMZN, also show weakness.  But overall, the market seems to be at another inflection point, whether it be Thursday, or Friday, and it should be right to keep longs on a tight leash and look to hit singles, not swing for the fences. 

While daily charts of SPX show a minor breakout above June highs, as i've discussed in recent days, the DJIA has not done the same, nor has the Russell 2k, nor DJ Transports.  We've seen the US diverge from Europe as well as seeing divergence among the various US indices.  Sector-wise, the rally has become splintered, and not as robust as what should be happening on a major index getting to new monthly highs.  Quite a few sectors remain laggards and /or ae not participating and this should become more important within the next few days.  As for a good risk/reward, Healthcare still looks ideal and one could look at the Oil Services sector which has fallen for 9 of the last 11 days despite Crude rising.  Gold and Silver also look to be finally trying to perk up (yet we've discussed this before and have been proven wrong.  Technically, it should be right to position away from Technology and Financials and Industrials and favor Healthcare, Energy and overall be defensive in the days ahead.   Movement down under 2789 will still be key for S&P, cash and Futures and will be watched carefully during Thursday and Friday's session. 


Additional charts and thoughts below.


NASDAQ weakness not too problematic.. yet.  Wednesday's post close in the NASDAQ futures saw prices decline by nearly 0.50% to levels right near the last couple days lows.  While this isn't a sell signal yet per se for NDX, prices are growing tired, as seen by momentum failing to make a higher high coinciding with price into the July highs.   June marked the highs in momentum.  The last couple weeks have produced a distinct churning which is much different than most in the Media would have the average investor believe when watching.  The constant chatter on FANG names will now start to take on a different meaning with both FB and NFLX, 50% of FANG, down after earnings and AMZN on deck.  In the event AMZN "whiffs' and NDX drops under 7292, this would be the first real sign of selling which should lead to a 1-2 week selloff after the rally from early July.  

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Semis should begin to weaken-  Semiconductor shares look vulnerable in the weeks ahead, as prices in SOX/SMH have violated a minor uptrend that had provided support for the rally from late June higher.   The broader pattern in SOX had been problematic for some time, with a series of rising highs and similar lows, while changing to show a lower high into June.  This consolidation won't be a problem for the longer-term SOX chart until prices get under 1200, but near-term, the breakdown over the last month has been an issue for Technology, and stocks like LRCX, XLNX, AMAT, ON, MU have traded much worse than the broader market, and appear like attractive risk/reward shorts.  

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 Facebook (FB- 213.59)  No imminent warning given technically of decline, but several factors suggested risk/reward was poor-  Given FB after Wednesday's post market plunge, it's only right to take a look at this stock technically and what could have signaled any sort of pullback in the shares.   Two factors stood out which looked to be a concern:  First , the shares had risen 30% above its long-term uptrend.  This had been holding the uptrend from 2013, so the amount that FB had gotten stretched above this area made it seem like a poor risk/reward heading into earnings, as opposed to the pullback into early this year, when the stock had tested this long-term uptrend.   Second, we saw evidence of weekly and monthly momentum divergence, as this recent sharp rise in the stock was not accompanied by a similar move in momentum, which had peaked out into January of this year.  While no real short-term technical reversal pattern was present heading into earnings (making it tough to short into earnings), it was clearly a poor risk/reward given these factors, and i said as much in my interview with CNBC on Tuesday.   Bottom line, while the market looks "dicey" at this point heading into 7/27, it's right to buy stocks like FB when they correct into long-term trendline support like what's happened post close on Wednesday.  The area at 160-5 should be attractive support to buy dips.  

Healthcare Bullish, while IWM, TRAN, SOX all down 1%;

July 25, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
280.64, 278.41, 276.28-.52, 275.62         Support
282.57, 283.53, 283.75-284, 284.25        Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/lnSOjY8ZbO
Tentatively scheduled for CNBC today at 2:20-:30

 

SPX - (1-2 Days)- Very close to resistance and turning negative- Mildly Bullish, but selling into 2835-45 into Thursday-  Stops placed at 2811. Tuesday's rally was a mirage for the indices given the weakness in IWM, SOX, TRAN to the tune of 1%.  Watchful for signs of market turning down, and not sure if we're quite there yet this week-  Key turn date lies at 7/26-7, and rallies into this time should find strong time-based resistance
  
SX5E- EuroSTOXX 50Mildly Bullish-  No change given very little price volatlity. Prices could still squeak out a bit more upside to 3550 before stalling out.  It's thought to be doubtful that SX5E makes a major rally back over 3650, so any near-term strength this week should be sellable. 

HSCEI- Bullish-  Trend reversal in HSCEI yesterday should help prices rally up to 11500 near-term, and Emerging markets and China could outperform US and Developed markets in the short run as USD stalls. 

Trading Longs:  THC, NBIX, LLY, BAX, M, TIF, TJX, BURL,VEEV, KFY, ETSY, ACN, WIX, ADP

Trading Shorts:  LUV, ALK, AAL, GE, VOD, VIAB, NFLX, FITB, EBAY, XLK, OIH, MDR, SMH, AMBA, PCAR LRCX, EWJ


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XRT with targets at 52, with stops at 49.50
Long XLP with targets 54.60-55, stopping out under 52.07
Long XLV targeting 89, and raising stops to 86.35

Short IYT, with targets at 185, stops at 195.90
Short XLF with targets at 26-26.50 and stops above 28.20 on a close (CLOSE)

Short SMH with targets at 96.10 & stops on shorts at 107.84- Press shorts under 103.71
Looking to buy Gold at 1200-1210 late this week, and buy GLD at 113.50-114.50

Upside should prove limited to 2835-45 for S&P Futures-  Tuesday's rise in the indices was largely a mirage to the underlying deterioration seen in much of the price action across various sectors.   Breadth finished negative in yesterday's trading and showed signs of having made a minor peak back on 7/9.  Additionally there remains concerns with the lack of participation in SOX, or TRAN, or IWM, all of which closed down 1% in Tuesday's trading.  While Financials climbed back to key resistance, some of the sectors look to have given up on participating, such as Industrials, and Discretionary, which has fallen for five straight sessions.  Meanwhile Transports now look set to turn lower given Tuesday's bearish close, and it's worth noting that the Russell 2000 and DJ Transportation Avg closed at the lowest levels in at least five days.  A very different picture indeed than what one might think after hearing that the DJIA closed higher by 197 points and the SPX higher by 13.   While the SPX and DJIA close are positives, the DJIA along with XLI and XLF still haven't definitively broken out above the downtrends that have been ongoing from January (and in the case of DJIA-  the resistance trendline from late February, connecting June highs which is being tested as of today)  So, not to belabor the point, but the broader market simply isn't acting like how the indices are showing lately and near-term breadth remains a concern. 

One bright spot concerns healthcare and the extent to which this just broike out to the highest levels of the year, which is a definite positive for this group.  Stocks like CELG, BIIB, LLY, BAX, XRAY, REGN all showed stellar signs of having made at least minor breakouts in recent days, and this sector should continue to be overweighted during this time, when many groups just aren't acting that well.   


Additional charts and thoughts below.

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XLV Breakout helps recent Healthcare outperformance continue- Healthcare still looks bullish, and yesterday's breakout amidst a market where many sectors are hitting new multi-day lows, appears promising and should help this sector continue to outperform in the days ahead.  Stocks like MRK, BAX, LLY, XRAY, CELG, REGN all made minor breakouts in recent days, and relatively speaking, XLV has been a very good source of relative strength these past few months.  Overall, this looks like an area to favor and given signs of Small Caps, Transports, Discretionary starting to wither, the healthcare sector looks like a more appealing option. 
 

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Russell breaking to new multi-day lows - Small-caps have underperformed in July as seasonality suggests should be happening during mid-term Election years, and now Russell 2k's break to new multi-day lows looks problematic at a time when the broader market is looking for leadership.  This minor trend violation looks to have broken the triangle pattern formed over the last month and should lead lower to finish out the last week of the month.  Russell 2k looks to weaken into early August but pullbacks should provide buying opportunities into August given the success of the relative charts in showing strength.  

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 Transports have peaked out every three months-  Has the DJ Transportation Avg peaked again?  similar to tops formed each of the last three months around this time going back since last year? This daily chart shows TRAN roughly at the same levels it was five months ago, having made literally no progress off this longer-term support line since the Average bottomed out post the first correction of 2018 into early February.   Yesterday's decline constituted a bearish engulfing pattern and finished at the lowest level since mid-last week.   The close also undercut the prior high made back on 7/9-7/10.  Bottom line, this group needs to be watched for evidence of pulling back, as the Transports have traditionally peaked at or before the broader market going back since last year.  Any larger violation of 10300 would be a concern towards thinking a larger move lower is underway.  

Financials nearing key levels as yields spike; GOOGL just minor help to FANG

July 24, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
278.41, 276.28-.52, 275.62, 274-274.50   Support
281.45-50, 282.40-5, 283.75-284              Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/lnSOjY8ZbO
Tentatively scheduled for CNBC today at 2:20-:30

 

SPX - (1-2 Days)- Neutral- Above 2818 would be bullish for move to 2830-40, while under 2789 turns near-term trend Bearish- Late day move above 2810.50 could result in S&P reaching 2818, but this is the area to concentrate on and above would lead to 2830-40 before stalling out.   However, breadth and momentum are not following and this should be a chance to sell into strength.  Below 2789 turns trend down quickly.  Key turn date lies at 7/26-7, and rallies into this time should find strong time-based resistance
  
SX5E- EuroSTOXX 50Mildly Bullish-  Not much change in the last few days, but arguably prices could still squeak out a bit more upside to 3550 before stalling out.  It's thought to be doubtful that SX5E makes a major rally back over 3650, so any near-term strength this week should be sellable. 

HSCEI- Mildly bearish-  Trend still bearish despite a few days of consoldation, and it's thought that US  Dollar really needs to turn down sharply to help HSCEI start to rebound.  Expect another 3-5 days of weakness before this reaches support and bottoms with key areas at 10200-350 to buy dips next week on further pullbacks.  

Trading Longs:  M, TIF, TJX, BURL, VEEV, KFY, ETSY, TWLO, INFO, SSTI, BZUN, HEAR, MDB, BAX, TLYS, ACN, WIX, ADP

Trading Shorts:  GE, VOD, VIAB, NFLX, FITB, EBAY, XLK, OIH, MDR, SMH, AMBA, PCAR LRCX, EWJ


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XRT with targets at 52, with stops at 49.50
Long XLP with targets 54.60-55, stopping out under 52.07
Long XLV , raising target to 88.50, and raising stops to 86.35

Short XLK  with targets at 70-70.50 and stops above 73.03 on a close
Short XLF with targets at 26-26.50 and stops above 28.20

Short SMH with targets at 96.10 & stops on shorts at 107.84- Press shorts under 103.71
Looking to buy Gold at 1200-1210 late this week, and buy GLD at 113.50-114.50


Upside should prove limited to 2830-40 and above 2818 provides this move, which would be used to sell into Thursday.   S&P still largely unchanged and despite the recent snapback in Financials, most of the market just isn't moving up that quickly, despite S&P being over June and March highs.  Prices are largely in line with levels from 7-8 days ago.  While the late GOOGL earnings beat has that stock up 3% into today's trading, it's thought that FANG stocks aren't great to position long in for anything more than 2-3 days time.    Overall, the near-term pattern will be neutral until S&P gets above 2818 from last Friday, or down under 2789 which held on early Monday'spullback. 
 
S&P has now largely moved sideways for the last 1.5 weeks, with the snapback rally in Financials really not serving to lift prices too meaningfully.   While many are concentrating on GOOGL's beat and stock surge after-hours, most aren't paying attention to Industrials weakening to multi-day lows.  Eight sectors were lower in Monday's trading and breadth was negative by a 3/2 margin, something that's problematic at this stage of the rally when broad-based participation higher has been difficult to come by.   While it's certainly bullish to see Financials strengthening, the XLF charts paint a different picture and both XLI and XLF still lie under key trendline resistance.  Overall, Retailing remains one of the better areas to favor long these days, along with Healthcare, but outside of these two groups, it's difficult to buy Financials at current levels, and the bounce in Industrials almost looks complete.  One should watch Technology carefully to see whether the FAANG space can manage to exceed June highs, which has been difficult thus far in NYFANG index.  However, the earnings for huge outperformers like GOOGL and AMZN are thought to be important, and this week should prove pivotal


Additional charts and thoughts below.

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Near-term Choppy range-bound picture near-term likely the opposite of how many are thinking about Stocks these days- The S&P has largely gone sideways over the last 6-7 days, despite being over June highs, and has not really accelerated, even with a decent bounce out of the Financials.  Bottom line, while most of my commentary has focused on the ongoing issues with breadth and momentum not keeping up of late, from a near-term price perspective, regaining 2818 would allow for a short-lived rally to 2830-40 before prices retreat.  Conversely, getting under 2789 kicks off the summer selloff which looks close, but which will depend on price cooperation.  Near-term, the bounce in Financials and the after hours surge in Tech are doing their part fo boost sentiment further at a time when prices haven't been able to push up too meaningfully of late.  When considering that XLI closed down at multi-day lows, most are ignoring that to focus on GOOGL, which has gotten stretched, and now should face resistance at 1275-85 in the days ahead.
 

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10-Year Yields likely peak out before getting above 3.00%-  Monday's biggest technical development concentrated on the sharp rally in Treasury yields, as the 10-year yield played catchup to the movement late last week in the 30-year.  The yield curve showed its hand early on with a meaningful breakout late last week in 2/10 and preceded to a large extent this move in TNX.   Near-term, it's likely that we're nearing resistance, and it's right to use this yield move to buy into Treasuries, particularly into end of week, with ideal areas at 2.98-3.00%.  Minor backtracking in yield on Tuesday should still result in some Treasury selling into Wednesday/Thursday before this move is complete.  However, given the bearish levels of sentiment that doubled down as yields dropped from May, it's unlikely that this bearish positioning is correct in the months to come.  It's thought that this larger pattern is morphing into a possible Head and Shoulders pattern for yields which should see a move to 3% find strong resistance before turning back down sharply and pulling back under 2.80%.

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 XLF- Sell rally at 28.25-.50--This recent yield rise really hasn't affected Financials too meaningfully, as the bounce in XLF still has not meaningfully broken out of the downtrend from late January highs.  One should expect to see a serious slowdown in Financials in the days ahead, with 28-28.50 area likely containing further XLF movement and producing a reversal back lower, not the breakout that many are expecting.  While technically it's right to be open to any outcome, the combination of a late Demark count (within 2-3 days of a TD Sell Setup in XLF) combined with serious trend resistance from late January should make this rally one to sell into.  

FAANG stocks look to be peaking, while Financials stalls out

July 20, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.28-.52, 275.62, 274-274.50        Support
281.45-50, 282.40-5, 283.75-284      Resistance


LINK TO TECHNICAL WEBINAR from yesterday- https://stme.in/lnSOjY8ZbO

 

SPX - (1-2 Days)- Disjointed market where NASDAQ, DJIA likely to take the lead in pulling back, but where S&P very well might hold up a bit lower.  A bullish view on SPY still makes sense barring a close under Tuesday's lows, which turns the trend immediately negative.  However, I think its just a matter of time, and even if markets hold up a week, there should still be a correction approaching, so gains should be used to sell into if given the chance. 

SX5E- EuroSTOXX 50Mildly Bullish-  Still a bit early to turn bearish, as Thursday'sminor weakness didn't take out prior days lows and a mildly bullish view is right until there's a close back under 3430

HSCEI- Mildly bearish-  Expect another 3-5 days of weakness before this reaches support and bottoms with key areas at 10200-350 to buy dips next week on further pullbacks.  

Trading Longs:  KFY, ETSY, TJX, FIVE, LULU, M, TIF, BAX, WING, PANW, TLYS,  CPB, ACN, WIX, 

Trading Shorts:  VOD, VIAB, NFLX, FB, AMZN, BBT, BK, FITB, EBAY, XLK, OIH, MDR, SMH, AMBA, PCAR LRCX, EWJ


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XRT with targets at 52, with stops at 49.50
Long XLP with targets 54.60-55, stopping out under 52.07
Long XLV , raising target to 88.50, and raising stops to 86.35

Short XLK  with targets at 70-70.50 and stops above 73.03 on a close
Short XLF with targets at 26-26.50 and stops above 28.20

Short SMH with targets at 96.10 & stops on shorts at 107.84- Press shorts under 103.71
Looking to buy Gold at 1200-1210 into early next week, and buy GLD at 113.50-114.50


S&P might hold up longer than NASDAQ, as Industrials, Healthcare hold up while Technology and the NASDAQ show weakness into next week.   Overall, getting under Tuesday's lows is important for thinking the trend in US indices is turning down across the board.  A combined effort by NDX, SPX and DJIA in getting under this weeks lows should provide the much awaited pullback into late July.   The next 1-2 trading days will confirm whether next week sells off into end of week, or can hold up a bit longer.  However, the selloff looks to be approaching, so holding up would just be a temporary fix.  
 

Not an easy market.  After being negative for the last few days into Thursday, it looked likeWednesday's move was bullish enough to hold the SPX up into next week.   NASDAQ however, nor DJIA had made any real progress, and both the latter turned down to multi-day lows as of Thursday's close.  Treasury yields pulled back sharply while the Dollar attempted to make yet another day of gains, which caused some weakness in Emerging markets after a fairly stable effort lately in the last week.   Overall, no real conviction right now until US indices start to show more evidence of reversing en masse under Tuesday'slows  (2789 for SPX, 7292 for NDX) Trends for now remain short-term bullish for Industrials and Healthcare while Technology and FAANG stocks in particular, have faltered.  However, a selloff does look to be approaching and the trend for 2-3 weeks is bearish, even if stocks manage to hold up for a few days.  It looks right to use rallies to flatten out if given the chance while using a close under Tuesday's lows to adopt a more negative stance, particularly on broad-based, higher than average volume decline.  

Looking back, breadth finished flat, again, on Thursday, with just a few more stocks advancing than declining.  Yet volume was heavier in declining issues to the tune of nearly 3/2 negative.   Only Real Estate and Utilities were positive, while Financials and Telecom both sold off greater than 1%. Given that the high flying mega-cap Technology and FANG stocks have begun to show weakness, a pullback now in Financials would result in a serious headwind to stocks.  The SKEW index meanwhile has hit the 2nd highest level ever seen yesterday, and has only been above 150 five times total in its history.  Thus, investors seem to be readying for pullbacks by buying downside protection.  This of course might limit the extent of the move once it gets underway, if many are preparing for it, but yet still important to mention.   The VIX meanwhile, has gradually formed what looks to be a base near prior lows and showing some evidence of stabilizing, which likely will result in this rising in the weeks ahead, and implied volatility at these levels looks cheap. 

Additional charts and thoughts below.

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The XLF looks close to reversing course back lower and its recent mean reversion bounce along with XLI likely should be coming to an end in the near future.   Given that this group represents over 12% of the S&P, seeing evidence of this reaching key resistance and stalling out should be a concern to most market participants, and a firm close back over 28.25 is necessary to have any conviction in this turning higher in a bigger way and helping to engineer a broad-based rally.  This looks unlikely for now, and Treasury yields made a fairly bearish reversal back lower that argues for yields to trend down further in the next 1-2 weeks with yield targets near 2.76%.  Overall, given the negative absolute and relative charts, Financials should be avoided. 

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FANG stocks took a turn for the worse in the last couple days, and instead of joining the NASDAQ in pushing above June highs a week ago, failed and have diverged negatively.   This failure to lead higher into July is one reason this group now stands to underperform given its close yesterday back at nearly 10-day closing lows, and gradually seems to be rolling over.  Stocks like NFLX look vulnerable to further near-term weakness, with targets down nearly 40 points near $324, while AMZN and FB also appear like near-term trading shorts as both have stalled and show evidence of upside exhaustion.  Overall, while a minor pullback thus far, this combination of Financials hitting resistance while Tech rolls over looks like something to pay attention to. 

 The VIX has made a new six-day high close, and looks to be trying to bottom out after having based at levels seen back in June and also in May.  The act of spiking into late June and then pulling back to former lows makes this an attractive risk/reward to buy dips in implied volatlity at current levels, thinking that the market is underestimating the degree of uncertainty and/or trade tension that lies ahead.   In the weeks ahead and particularly into the volatile September/October period, being able to buy implied volatility with the VIX under 13, having nearly been cut in half from early April and nearly 8 points lower from mid-June makes a ton of sense. 

Retail breakout, along with Europe are temporary positive factors

July 19, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.28-.52, 275.62, 274-274.50        Support
281.45-50, 282.40-5, 283.75-284      Resistance


LINK TO TECHNICAL WEBINAR from last Thursday-https://stme.in/KWJGLYbh4g

 

SPX - (1-2 Days)- Bullish into 2740-5 next Thursday/Friday-  An immediate reversalThursday back under 278.41 SPY, or 2789 S&P Futures needed to put the bearish case back on track.  Shorts are stopped out over 2816.75 in S&P Futures, and SPX cash above 2820 likely leads to 2840-5 into NEXT Thursday/Friday.  NDX stops are 7480

SX5E- EuroSTOXX 50Bullish-  Wednesday's breakout above the downtrend does in fact turn the trend positive for Europe in the very short run.  This was unexpected, but the combination of the breakout above early July and also a trend breakout from late May are important as near-term positives for this chart.  Movement up to 3534-3575 looks possible while any pullback down under 3429 makes the bear case take front and center again

HSCEI- Mildly bearish-  No real evidence is there just yet like we've seen in Europe and US but prices likely hold lows barring a breakdown in SPX, SX5E.. and this has not happened just yet.  10200 should be area to buy on dips

Trading Longs:  ETSY, TJX, SCVL, FIVE, LULU, M, PANW, TLYS, KFY, NTCT, XLP, CPB, ACN, DPZ, WIX, 

Trading Shorts:  XLK, OIH, MDR, PPG, BMS, OC, PNR, CMI, FLR,  SMH, AMBA, PCAR, CB,, LRCX, EWJ, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XRT with targets at 52
Long XLP with targets 54.60-55
Long XLV , raising target to 88.50, and taking profits on any close under 85.10

Short XLK at 71.90-72.25 with targets at 70-70.50
Short XLF with targets at 26-26.50

Short SMH with targets at 96.10 & stops on shorts at 107.84



S&P has exceeded key resistance in SPY and right at important levels in SPX, ES.  Meanwhile NASDAQ at resistance (Stop 7870) while DJIA is still under June highs. Given prices have not reversed course into mid-month, it's tough to rule out a lackluster bounce into 7/26-7 which should be sold, unless prices turn down literally right away on Thursday.  

Bottom line,  being above March and June highs is constructive for SPX, despite the lack of confirmation in DJIA and counter-trend exhaustion in NDX-  Given the lack of reversalWednesday, we're moving out of the time zone for trend change and Thursday is likely to prove this case and settle any near-term discrepancy.  The movement in many Rail stocks along with the Airlines was bullish on Wednesday while Financials have also rebounded.  While not wanting to fight the trend, it's important to state that both XLI and XLF are now right at trendlines from late January which mark DOWNTRENDS for both sectors.  So this mean reversion has been positive in helping to buoy the market at a time when Technology and many FANG stocks have faltered a bit, but yet the sector rotation is helping to pick up the slack and for now, it's important to watch both Tech and Financials for evidence of these turning lower.  At present, Healthcare has been the consistent leader in recent months, while most others have gone through minor corrections and then started to rebound.

As mentioned, the issues with breadth and momentum are very real and 90 times out of 100, they matter.  Breadth was flat today.. again.  NDX meanwhile stalled and has two consecutive counter-trend sells within a week after pushing up to new highs on lower momentum.  XLI and XLF will need to get above 76 and 28.25 respectively to think these sectors can work and this is not just a bounce.  Meanwhile sentiment polls like Inv. intelligence have widened out to more bullish readings lately  with a Bull-bear spread of 36.8,  not the same levels as seen in late January at the peak, but important to take note of nonetheless, particularly since the tariff threat or chance of Chinese "re-raise" hasn't gone away.  The CNY/USD Reminbi has continued to plunge to new depths, while the US Dollar has furthered gains, which adds the uncertainty of a possible emerging market crisis to the mix.   Additionally the time near 7/26-7/27 looks quite important for trend change (7/13 really didn't work for US markets) and rallies into late next week would be something to sell into given time considerations.  Overall, it pays not to be complacent, and depending on one's risk tolerance, utilizing a move under yesterday's lows or Monday's lows to be bearish makes sense, while thinking SPY over 281 was important, and might have a date with 283-284.50 before finding resistance that truly matters.  

 

Additional charts and thoughts below.

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The SPY's push above 281 managed to stop out any near-term sells, while "perfecting" the breakout above the TD line from last week.  In English, this means that trends likely should extend into next week before registering any Sell.  While an immediate pullback under 279 would be respected and followed, the path of least resistance now looks to be higher, at least for now, and we'll monitor where prices are into late next week, but a push to 283.50-284.50 can't be ruled out.  (note, S&P Futures still did not exceed the 2816.75 area mentioned, nor SPX cash above 2820, but the SPY chart is the key chart which presents a near-term bullish picture price wise, so stop-outs look important, and at least a minor positive.   Note, the breadth and momentum divergences have not yet amounted to all that much, but yet XLI and XLF being near resistance "should" put a ceiling on how far these can go, but Technology continues to be the sector to watch for leading purposes.  We've stalled a bit in FANG stocks, but yet no material turn down just yet.
 

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Retailing made a very promising technical move yesterday, exceeding early July 49.97 closing highs which can help set its sights on a push up to 50.85 or even a minor new high.  This XRT etf had been showing signs of consolidation in the last month, but yesterday's movement was definitely a bullish move, and argues for strength in this sector in the days ahead.  My favorite stocks in the retail space are: ETSY, SCVL, TJX, FIVE, LULU, BURL, M, DSW, TLYS, ROST, URBN, BOOT, NWY, ENR, and KSS.

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 The Industrials ETF, XLI, made a positive rally on Wednesday that managed to get back above early July highs and exceed $74 on a close, which could help this extend a bit more near-term.  The Transports rebounded given promising movement in Rails and Airlines and points to this potentially getting to 75.75-76 before finding resistance.  Yet, the larger chart remains bearish and won't turn positive until this gets back over 76 on a close, making rallies likely something to sell into.  XLF looks very similar but is closer to resistance.  So for those wondering if S&P can push up to late January highs, not only will we need to see NDX ignore its countertrend sells and XLK start to push up with FANG stabilizing, we'd also need to see both XLI and XLF start to structurally improve by breaking out of these downtrends, which is a tall order.   For now though, another $1.50 looks possible in XLI into next week.  

"Shorts kept on Tight leash"

July 18, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.28-.52, 275.62, 274-274.50*    Support
280.8, 281.50, 282                         Resistance


LINK TO TECHNICAL WEBINAR from last Thursday-https://stme.in/KWJGLYbh4g

 

SPX - (1-2 Days)- Bearish/Cautious- Expect Tuesday's move was an exhaustive spike, but will stop shorts out if prices don't reverse back lower Wednesday-   Keeping a tight stop on Shorts at 2820 S&P cash, and above this on a close leads to 2841.  NDX stops are 7480

SX5E- EuroSTOXX 50Bearish- No change based on Tuesday  No real evidence of any real progress, and the stalling out should give way to weakness back to recent lows at 3350 and below into end of month.  

HSCEI- Bearish- No change-Weakness in the days ahead likely with support to buy for trading down at 10200.  

Trading Longs:   QID, VXX, VRTX, HCA, PANW, TLYS, KFY, NTCT, XLP, CPB, ACN, DPZ, WIX, 

Trading Shorts:  XLK, XLE, OIH, MDR, IYT, PPG, BMS, OC, PNR, CMI, FLR, GDI, ITRI, XLK, SMH, AMBA, RHT, FOXA, ALK, UAL, PCAR, CB, MS, LRCX, EWJ, LB, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XLP with targets 54.60-55
Long XLV , raising target to 88.50, and taking profits on any close under 85.10

Short XLK at 71.90-72.25 with targets at 70-70.50
Short XLF with targets at 26-26.50

Short SMH with targets at 96.10 & stops on shorts at 107.84
Short HG_F- Copper with targets at 263- Close above 290 is reason to take profits on shorts


Markets should be at an inflection point near-term, and expect that gains prove muted before prices turn back lower to give back at least 50% of what's been gained since early July by 7/26-27.

Despite Tuesday's rip back to new highs for NDX and S&P getting over March and June peaks, there remains a small 1-2 day window for a reversal and difficult to chase price as it moves to new highs.   Markets have shown hourly negative momentum divergence, while Transports, Energy have not participated.  While the Healthcare rally has been constructive, Financials are also largely not able to follow through on the move seen on Monday.  So this remains a splintered rally and not one that gives a lot of conviction at a time when breadth and momentum have waned.

Yesterday's move happened on just mildly positive breadth, again something that is cautionary when prices push above former peaks.   The DJIA, which is highly correlated with SPX is nowhere near June peaks, while most of Europe and Asia have been trending lower.  Overall, this makes it difficult to embrace this push to highs, but yet for risk management purposes, movement above 2820 would simply push us to the sidelines until July 26th when a larger cycle is due. For now, its still right to concentrate on being long healthcare, avoiding Industrials and Financials, and watching Tech closely as this sector has given signs of being near a trend reversal. 

Additional charts and thoughts below.

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The NASDAQ has now pushed up to new highs in a manner that will allow its second counter-trend sell signal in a week to emerge, right at a time when momentum has had difficulty in keeping up while Technology has shown increasing signs of stalling out relatively.  I'm not keen on chasing this move back to new highs into mid-July here and still expect NASDAQ to reverse course.  However, this must happen in the next 1-2 days and NASDAQ can't get above 7480 without abandoning shorts and holding out until more proof is at hand.  Wednesday/Thursday should be important for trend reversal and if this doesn't work than a push higher into a more prominent peak at 7/26-7 is underway.

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The turn back higher in the US Dollar in the last couple days has caused Gold to break June lows and definitively violate the lows from last December which arguably also violates the longer-term 2 year uptrend that most have been watching.   Given the short interest now in Gold and the degree of oversold conditions and Demark buys in the last couple days, while seasonality is getting bullish into August, this should be setting up for a trading low by the end of July.  For now, getting under 1350 stopped out longs, but one should look again within the next week, as it looks increasingly likely that Gold should be nearing some formidable support near last July's lows. 

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 For all those that had forgotten about Cryptocurrencies, yesterday's move certainly puts this back on the front burner.  Bitcoin managed to exceed 6800, a level that coincided with two prior peaks as a Reverse Head and Shoulders pattern looked to have been exceeded with the surge above 6800  Near-term targets lie at 8000, and a slowdown is possible after the extent of yesterday's move.  Yet above 8000 would go a long ways towards thinking a push back to 10000 and above should happen, so this area should be watched carefully. 

Markets look to have begun the process of Stalling out

July 17, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.28-.52, 275.62, 274-274.50*    Support
279.48, 280 -280.8                       Resistance


LINK TO TECHNICAL WEBINAR from last Thursday-https://stme.in/KWJGLYbh4g

 

SPX - (1-2 Days)- Bearish/Cautious- No meaningful damage on Monday, but yet definite evidence of distribution which should have begun the near-term topping process for this recent 2 week rally.  Look to sell 2803-10 for SPX, thinking that this area is important.  Movement down under 2793 would be something to consider following, not buying right away, but with Stop and reverse at 2810 on a close.  

SX5E- EuroSTOXX 50Bearish-  No real evidence of any real progress, and the stalling out should give way to weakness back to recent lows at 3350 and below into end of month.  

HSCEI- Bearish- Weakness in the days ahead likely with support to buy for trading down at 10200.  


Trading Longs:   QID, VXX, VRTX, HCA, PANW, TLYS, KFY, NTCT, XLP, CPB, ACN, DPZ, WIX, 

Trading Shorts:  XLE, OIH, MDR, IYT, PPG, BMS, OC, PNR, CMI, FLR, GDI, ITRI, XLK, SMH, AMBA, RHT, FOXA, ALK, UAL, PCAR, CB, MS, LRCX, EWJ, LB, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XLP with targets 54.60-55
Long XLV , raising target to 88.50, and taking profits on any close under 85.10

Short XLK at 71.90-72.25 with targets at 70-70.50
Short XLF with targets at 26-26.50

Short SMH with targets at 96.10 & stops on shorts at 107.84
Short HG_F- Copper with targets at 263- Close above 290 is reason to take profits on shorts


Markets should be at an inflection point near-term, and expect that gains prove muted before prices turn back lower to give back at least 50% of what's been gained since early July by 7/26-27.

Bottom line, Monday's trading showed far more evidence of distribution than what might be implied by the DJIA moving higher by 44 points.  Despite a much needed bounce in Financials, neither Tech, nor Industrials were able to join suit, and both fell on the day, along with most other sectors, with 8 out of 11 sectors finishing down on the day with breadth of roughly 2/1 negative.  The after-hours plunge by NFLX to the tune of 60 points wasn't too unusual for any that have studied this stock's history during earnings in July or January for that matter, but did result in a late selloff in NASDAQ futures back under mid-June highs.  Overall while minimal damage happened by the close, there was significant damage in Transportation stocks and Energy, while most Tech stocks also failed to pick up the slack.  Overall, this looks like a market that's quite tired and after a decent start to the 3rd quarter, many charts still appear to be under pressure when looking at Industrials, Financials, Transportation, while the overbought Tech stocks have all begun to wane.  Unfortunately this is happening during a time when quite a few technical factors are pointing for stocks to make at least a minor correction into late month.   

Near-term, it's right to be selective and under 2793 likely leads to a selloff down to 2770, the larger line in the sand.  Whether or not Financials can follow through on Monday's strength will be key.   Additionally, Transports and Energy have taken a turn for the worse, so its important to see these sectors hold and not give back too much near-term.  In the event that stocks manage to rally into Tuesday, this would set up for a more attractive risk/reward opportunity to lighten up into Wednesday, as its thought that global indices have begun the process of turning back lower, which has little to nothing to do with Earnings, and more to do with market cycles, sentiment and recent divergences.  Charts below will help to put some of these thoughts into perspective. 


Additional charts and thoughts below.

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The after hours selling in NFLX post close caused a drop in the NASDAQ as NFLX fell nearly 60 points post close on lower subscriber growth, erasing about 1/3 of the gains it's seen this year.   NASDAQ Futures have dropped back under prior highs from mid-June, and while it's tough to rule out a minor move back to new highs, it should occur on much lower breadth and volume and has maximum upside to near 7461.  Meanwhile, any move back under 7204.50, the intra-day lows from last week, give confirmation of a top in place and can allow for more meaningful weakness down to 7000 to test late June lows.  For those that study momentum, note the negative divergence present in NASDAQ as it logged this most recent push to new highs while momentum did not follow suit.   TD Sequential sell signals on Nasdaq futures will be confirmed by Tuesday's close under 7253.75, or by Wednesday's close (far more likely) under 7382.75, or current levels.  Overall, a top looks near, and any gains should be used to sell into, by Wednesday. 
 

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WTI Crude's pullback in the last couple weeks has led most of Energy lower, albeit in choppy fashion where Exploration and Production stocks have largely outperformed, while both XLE and OIH have trended largely lower from mid-May.  Interestingly enough, while Crude was hitting new monthly highs into early July, most of the Energy sector was well off highs made back in May.   This relative chart of the OIH vs SPX shows the extent to which most of this sector has lagged badly in the last two months since May's peak.  Monday'strading brought about a break in minor three-week uptrend lines for XOP and XLE, suggesting additional near-term weakness might lie ahead.   Overall, this chart of Energy, shown by the relative performance of the Oil Service stocks, suggests that further weakness is likely before this sector can bottom out, relatively speaking.  Therefore, despite Crude looking to be close to near-term support after nearly a 10% loss in the last two weeks, Energy looks early to buy into for the most part, and extreme selectivity is a must. 

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 Transports have taken a turn for the worse with Monday's close down at multi-day lows which is now challenging a larger area of key trendline support.  Many of the Rails dropped to weekly lows, while the Airlines continue to trend lower from mid-March.   The DJ Transportation Average can't afford to get under 10300 without violating the entire pattern from February which would lead to a test of February lows near 9800.  Overall, this was one particularly weak spot in Monday's trading, and those involved with this sector should take notice of what an important spot price has pulled back to which is considered a Make-Or-Break for pullbacks.  

Stocks push up to key Price and Time based resistance - Stallout/Reversal expected

July 13, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.28, 275.62, 274-274.50*       Support
279.48, 280 -280.8                       Resistance


LINK TO TECHNICAL WEBINAR from yesterday-https://stme.in/KWJGLYbh4g

 

SPX - (1-2 Days)- Bearish/Cautious- Yesterday's surge brought prices right up into the sweet-spot for what could be a reversal similar to what's happened in recent months into mid-month-  Look to sell 2803-10 for SPX, thinking that this area is important.  Movement down to new multi-day lows would be something to consider following, not buying right away, but with Stop and reverse at 2810 on a close.  

SX5E- EuroSTOXX 50Bearish-  Regardless of minor strength yesterday, prices still have major resistance near-term at 3475-3505, and should pullback to test former late June lows near 3350.

HSCEI- Bearish-  No Change- It's thought that the Dollar's surge likely coincides with further weakness now in China and emerging markets and this bounce from two weeks ago likely could be complete.  Pullbacks down to 10188 looks likely. 


Trading Longs:   VXX, QID, NTCT, XLP, CPB, MNST, APC, LSCC, ACN

Trading Shorts:  XLK, SMH, AMBA, RHT, EL, TREE, FOXA, ALK, UAL, HTZ, PCAR, CB, MS, FITB, VGK, SMH, LRCX, KBE, KRE, EWJ, LB, TSCO, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XOP, with targets at 46.50 and stops at 42.25-
Long XLP with targets 54.60-55
Long USO with targets at $16.50
Long XLV , raising target to 88.50, and taking profits on any close under 85.10

Short XLK at 71.90-72.25 with targets at 70-70.50
Short XLF with targets at 26-26.50

Short SMH with targets at 96.10 & stops on shorts at 107.84
Short HG_F- Copper with targets at 263- Close above 290 is reason to take profits on shorts


Expecting Thursday's push back to new highs represents a much better risk/reward to sell into given classic divergences, near-term overbought conditions while breadth and momentum have waned in the last week.   Specifically in Technology, exiting gains and taking profits looks prudent, awaiting reversals, but time-wise, if a reversal is going to happen, it should happen today into Monday.   SX5E reversed from its resistance at 3475-3505 for Europe.

Bottom line, Thursday's push higher helped XLK, NDX create exhaustion signals (per Demark indicators) while as expected, none of the other indices followed suit.  While some might view this as a bullish breakout, keep in mind that this has happened several times in recent months where prices has gone slightly above prior highs, only to fail into mid-month and pull back.  One particular cycle hits mid-month that i'm watching which could have importance in causing strong upside resistance for SPX at 2805-10 and reversing course, and if a stallout/reversal is going to happen, the key times for this month are now, and at the end of July.  

Thus with Summation index and Advance/decline having stalled out in the last week and turned lower, we've managed to push higher on less than optimal breadth while momentum is still under pressure after the peak and selloff from mid-June, so classical momentum indicators are not following prices back to new highs for NDX, and could be problematic at a time when Technology seems to have hit some meaningful resistance.  

Financials will truly be the key given the degree that this group has lagged, and given the push higher in the Dollar index while a threat of a China response to Trump's 200 billion Tariff re-raise could be in the cards, it seems like a good risk/reward to lighten up at a time when optimism has risen yet again, largely given Technology's comeback, with GOOGL, NFLX, AMZN, FB, AAPL all showing recent strength.  Meanwhile, groups like Utilities and telecom, REITS have all outperformed Technology in the last month.  Overall, I favor cutting risk and flattening out while adding exposure to implied volatlity at current levels, thinking "Vol" has gotten well too cheap with whats happening both technically and also on the geopolitical front.  The next 2-3 trading days will confirm whether this thinking is right, or whether this rally can possibly continue into July 26-7.  My thinking is it's right to take some profits here, technically and flatten out and await what happens, looking to pounce on any decline Friday or Monday in thinking it might extend. 

Additional charts and thoughts below.

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S&P has followed nearly perfect symmetry in recent months and yesterday's lift helped SPX to come within 1 day of perfecting its upside exhaustion right as prices have lifted into the 2800-10 zone which was thought to be important heading into mid-July.  While some might see this as a bullish breakout, keep in mind that momentum has not followed price back to new highs and breadth has dropped off in the last week, while optimism has swung back into favor as Tech has rallied.  This looks to be a rather inopportune to "play the breakout" at a time when everyone is eyeing this 2800 level and expecting a move through to be a real positive.  The cyclical picture along with sentiment, and near-term breadth/momentum decline in the last week should be important here in mid-July, and it looks like an area to take off risk, nearterm.  
 

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XLK looks to be nearing an area to fight the trend, as momentum has barely followed suit to price's rise back to new highs, and counts show a completed Sell Setup per exhaustion counts that have religiously appeared at both highs and lows in XLK in recent months near turning points.   Given that price has had a history of making minor new highs before failing, I put less credence in this being a traditional breakout to follow, but the next few days should speak volumes as to what's happening.  For now, given that we've gotten long into late June/early July, i'm expecting that price could follow the scenario seen in recent months and peak out mid-month, so while shorting might seem too aggressive or counter-trend in nature, it looks right at a minimum to take some risk off the table and await the next 2-3 trading days to see what unfolds.  

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 The "All-Stocks" Advance/Decline has made a minor peak about a week ago, so this recent surge to new highs has not occurred on above-average breadth or participation that should be thought of as a broad-based breakout of any sort.  If anything, movement to new monthly highs in indices where breadth is moving lower should often lead to attractive opportunities to take profits and await some type of counter-trend reaction which should lead to better buying opportunities at lower levels.  While the A/D moving to new all-time highs was thought of as being bullish a few weeks ago for the broader market's health, the near-term deterioration is what's concerning and likely leads to a minor slowdown/reversal. 

Dollar gains adding fuel to Emerging market fires, as Stocks dip

July 12, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.28, 275.62, 274-274.50*         Support
277.76, 278.73, 279.48, 280          Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/ZcAsX0tbnS

 

SPX - (1-2 Days)- Bearish/Cautious looking to sell into gains if given the chance at 2800-2810, expecting at least a minor pullback to unfold in the days ahead and potentially into the next key turning point at end of month, near July 27.      

SX5E- EuroSTOXX 50Bearish-  Prices have turned down from resistance at 3475-3505, and should pullback to test former late June lows near 3350.

HSCEI- Bearish-  It's thought that the Dollar's surge likely coincides with further weakness now in China and emerging markets and this bounce from two weeks ago likely could be complete.  Pullbacks down to 10188 looks likely. 


Trading Longs:  TNDM, NTCT, RUN, XLP, CPB, MNST, APC, LSCC, MRK, LLY, ACN, PLNT

Trading Shorts:  EL, FOXA, ALK, UAL, HTZ, PCAR, CB, MS, FITB, VGK, SMH, LRCX, KBE, KRE, EWJ, LB, TSCO, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XOP, with targets at 46.50 and stops at 42.25-  Nothing changed despite Wednesdays selloff, and trends are intact
Long XLP with targets 54.60-55
Long USO with targets at $16.50
Long IYT, with targets at 192, stop 183.41
Long XLV , raising target to 88.50, and taking profits on any close under 85.10

Short XLK at 71.90-72.25 with targets at 70-70.50
Short XLF with targets at 26-26.50

Short SMH with targets at 96.10 & stops on shorts at 107.84
Short HG_F- Copper with targets at 263- Close above 290 is reason to take profits on shorts


Expecting another 1-2 days of selling with downside targets near 2740-5 while under this could cause the larger selloff down to late July, which for now is too early to call.  If Thursday happens to rally, this would cause a much better risk/reward to sell into near 2800-5.  Targets on longs are limited to near this zone for S&P and SX5E reversed from its resistance at 3475-3505 for Europe.

S&P Futures largely held the area near first key support at 2770 throughout most of the session after having hit that level when  additional tariffs were announced Tuesdayevening.   The Dollar rose sharply and commodities and Emerging markets fell.  Bond yields also reversed back lower given Wednesday's auctions and a flight to quality while the Defensive sectors largely outperformed.

Overall, trends showed signs of being close to peak out based on resistance near 2800 on Tuesday, and lack of Breadth and participation earlier this week that reversals could be near during the pivotal time near July 13.  Time cycles and Demark exhaustion looked close, but failed to given real confirmation for late Tuesday/Wednesday.  As ofWednesday's close, it was tough making too much of yesterdays trading as thinking a big selloff right away is imminent, and prices will have to do far more damage to expect a larger selloff, undercutting 2744 which lies near the prior highs from late June and represents a key area for potential trend change.  However, the trend remains defensive given Wednesdays's decline  and it's right to use pullbacks under 2770 as thinking a move down to 2740-5 can happen, while also utilizing any Thursday strength to consider selling into, particularly near the key 2800-5 area.  

Bottom line, there was a bit lacking in enthusiasm to make much of Wednesday's pullback, as prices seemed to peak a bit ahead of schedule and failed to generate any meaningful signs that yesterday was the start of a larger move.  So the next two days will be truly important in either validating 6/10 as a top, or pushing up to peak on 6/12-3 before a selloff into July 27.   By the same token, further weakness into late Thursday very well could bottom out near 2740-5 and turn higher, which can't completely be ruled out given how many indices are at/near all-time highs.  So not a lot of conviction heading into Thursday, but it's right to be defensive, and use both strength up to 2800 along with weakness under 2770 as thinking this could be right to sell into.

Additional charts and thoughts below.

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S&P failed to do sufficient damage to think an above-average selloff had begun as of yesterday's close, and hourly charts show the pullback which largely held overnight lows from late Tuesday evening and settled down on this minor trend.  Thus, two strategies look correct given the thoughts that S&P did look near a peak, but it got underway a bit prematurely yesterday.   Look to use strength back to the highs at 2800-5 to sell into, while using any break of 2770 on hourly closes as being a negative that should drive price down to 2740-5 into late Thursday/early Friday before we attempt to stabilize and bounce.  Until S&P can close under 2744, it's difficult making much of a mild selloff following our most recent rally, but Wednesdays' decline does make it right to be defensive given this week's late week cycle and what might lie in store in late July.
 

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XOP, the Energy Exploration and Production ETF, sold off sharply yesterday but failed to do much technical damage and by the close, had settled near levels that make this attractive to buy dips after its breakout and pullback.  While the selloff in WTI Crude was unexpected, Energy's decline hasn't shaken many of these ETF's that have improved momentum wise and structurally over the last few weeks.  It still looks right to bet on higher prices for XOP and use 42.25 as a stop while projecting up to 46.50-.65 for resistance.  Under last Friday's lows of 42.25 certainly changes the picture, but makes buying into this a much better risk/reward heading into Thursday.  

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 The Dollar's move back up above 1180 in the Bloomberg Dollar index caused a sharp pullback in many commodities Wednesday, while Emerging markets also suffered, with sharp declines in RUB, TRY, ZAR, PLN, HUF while developed market currencies like the Aussie Dollar and Japanese Yen also fell moderately.  In the case of the Japanese Yen, the pullback was strong enough for USDJPY to break out above a one-year downtrend, so while the Dollar has looked to be peaking starting in mid-June, this looks to be a process and could take another couple weeks before this pattern is complete.  Bottom line,Wednesday's Dollar rally looked bullish and could send Emerging markets back lower near-term along with precious metals which might double-dip and postpone any meaningful rally until late July/early August.

Late day Tariff reversal after S&P Tests key Resistance

July 10, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.94, 275.99, 274.53         Support
278.73, 279.48, 280              Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/ZcAsX0tbnS

 

SPX - (1-2 Days)- Bearish/Cautious looking to sell into gains if given the chance at 2800-2810, expecting at least a minor pullback to unfold in the days ahead and potentially into the next key turning point at end of month, near July 27.      

SX5E- EuroSTOXX 50Bearish-  Prices have reached resistance at 3475-3505, and should coincide with a stalling out and turn back lower in SX5E. 

HSCEI- Mildly Bullish, after the breakout of the one month downtrend should lead to higher prices into late July potentially.   While the Trump Tariff possibilities might weigh on global equities, one should be bullish unless 10713 is broken as this would result in a retest of 10450 which is more serious support.  


Trading Longs:   XLP, MRK, XOP, XLE, COP, SM, WPX, LLY, ACN, PLNT, NTCT

Trading Shorts:  CB, MS, FITB, VGK, SMH, LRCX, KBE, KRE, EWJ, LB, TSCO, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XOP, with targets at 46.50 and then nothing til around 52
Long XLP with targets 54.60-55
Long USO with targets at $16.50
Long IYT, with targets at 192, stop 183.41
Long EEM with targets at 45, stops 42
Long XLV , raising target to 88.50, and taking profits on any close under 85.10

Short XLK at 71.90-72.25 with targets at 70-70.50
Short XLF with targets at 26-26.50

Short SMH with targets at 96.10 & stops on shorts at 107.84
Short HG_F- Copper with targets at 263- Close above 290 is reason to take profits on shorts


Flat as of Tuesday's close, with thoughts that any further lift and/or rally back from post-market Futures decline would create good selling opportunities intoWednesday's close ahead of possible peakout and at least a minor selloff.  Targets on longs are limited to near 2805-2810 for S&P and SX5E reached its near-term target at 3475-3505 for Europe.

S&P Futures fell into the close and opened down thereafter in post-market electronic trading, which at the time of this writing, had futures trading down 11.75, or nearly -0.50% while SPX cash managed to finish above June highs, what some might label a successful breakout.  However, breadth was flat throughout the session and Financials struggled in trading, closing down on the day while the Defensives rallied back sharply.  In fact, over the last 30 days, Utilties, REITS and Staples have led all other eight S&P GICS Level 1 sectors while both Financials and industrials have been down greater than 3%.  Not what one expects to hear for a market that many feel is quite resilient.   In fact, Technology is just barely positive over the last month, an important point given that Tech was counted on to lead.   To be fair, 30 days ago nearly lined up with mid-June peaks and Tech and Industrials have both gained ground in July.  Yet, we've seen a real struggle out of both of these groups of late which accounts for nearly 40% of the market and makes it difficult to "join the party" when S&P is at serious crossroads near 2800 which everyone is eyeing.   (The fact that this level is so blatantly obvious can create false breakout opportunities, particularly when breadth starts to fail coinciding with Demark exhaustion signals.   However, a move above 2810 would in fact be reason to follow, looking to cut losses on any reversal back under 2800.  

The real opportunities seem to still be in Energy in the short run, which along with Pharma in Healthcare, have roared back with a vengeance of late.  Crude's push back higher inTuesday's trading argues that WTI has a bit to go on the upside before this Summer rally has exhausted itself and its right to be long Crude and long Energy as a sector, while trimming gains in Technology and Financials on any rallies.   

Overall, the late day/early evening selloff presents two possibilities.  Either futures recover on a lack of Trump additional tariffs being rolled out overnight, and make a minor new high before stalling out Wednesday-Friday, or selling late Tuesday carries over and creates a decline from Wednesday into Friday of this week which in turn likely could be buyable as markets approach the next important turn date, near 7/13.    We're open to either scenario, but much depends on whether futures can rally back.  At Tuesday's close, there weren't sufficient signals to think a reversal was imminent, but the reversal happened right near the important area of trend change from a price perspective, and just a couple days ahead of schedule.  So this warrants a more defensive stance, particularly given the degree to which prices have rallied in recent days.  


Additional charts and thoughts below.

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Technology has lagged considerably in the last month and it's insightful to see how this sector looks relative to the SPX which has gone largely sideways since mid-June, whereas momentum has fallen off pretty dramatically.  Ratio charts of the S&P 500 Information Technology index v SPX shows a very 'sideways' trend, unlike what most would believe is happening with Tech when they hear of GOOGL, FB, MSFT, AMZN NFLX gains.   Tech looks to be nearing serious resistance in the short run after nearly 6 of 7 days higher, so one should consider taking profits given near-term overbought conditions as part of a very lackluster, waning trend.

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Crude oil has made new multi-day highs yet again after just a minimal selloff opportunity, and further gains look likely technically barring a pullback back down under $72.  Gains appear likely for both WTI along with Energy which remains one of the better near-term outperformers in the market, along with Staples.  

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 Consumer Staples has been one of the stronger groups in the last month, along with the last week, thanks to strength in KR, MKC, KHC, PEP with stocks like ADM, MO, CAG, WMT, MNST rallying more than 3% in the last week alone.   The near-term trend favors more upside for this group, and should continue to favor further outperformance, while the monthly charts will start to show serious overhead resistance once S&P consumer Staples index reaches 560.   For now, this still looks like a sector to favor above Tech or Financials near-term.

Energy, Healthcare favored as S&P reaches June, March mid-month peaks

July 10, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.94, 275.99, 274.53         Support
278.73, 279.48, 280              Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/ZcAsX0tbnS

 

SPX - (1-2 Days)- Mildly bullish with gains likely finding strong resistance near Mid-June, Mid-March highs near 2800-5 before a minor backing off come mid-month.     

SX5E- EuroSTOXX 50Mildly Bullish- Looking to sell into gains on Tuesday/Wednesdayat 3475-3505, as this level is strong resistance and should coincide with a stalling out and turn back lower in SX5E. 

HSCEI- Mildly Bullish, as the close at four-day highs likely leads to a bit more strength into Wednesday/Thursday before a reversal.  Rally to 11205 looks possible and above a maximum move to near 11430 before stalling out.  Charts over the weekend showed it was premature to favor Emerging markets for anything more than a bounce, so 3-5 days of gains likely would be a chance to sell into this move, but for now, downtrends have been broken and supports the idea of a bit more strength.


Trading Longs:  XOP, XLE, COP, RIG, SM, WPX, LLY, ACN, PLNT, NTCT, INFO, TZOO, ENR, WEX, GBTC, IYT, XLI

Trading Shorts:  VGK, SMH, LRCX, KBE, KRE, EWJ, LB, TSCO, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XOP, with targets at 46.50 and then nothing til around 52
Long IYT, with targets at 192, stop 183.41
Long EEM with targets at 45, stops 42
Long XLV , raising target to 88.50, and taking profits on any close under 85.10
Long GDX , but using any Tuesd/Wed rally to take profits near 23 with thoughts of revisiting in late July
Long GLD with upside targets initially at 122, then 127.50

Short SMH with targets at 96.10 & stops on shorts at 107.84
Short HG_F- Copper with targets at 263- Close above 290 is reason to take profits on shorts


Sell into gains between Tuesday-Thursday of this week, with targets near 2805-2810 for S&P and 3475-3505 for Europe's SX5E, thinking that gains should not continue uninterrupted without a stalling out and another minor reversal.  Until then, there have been no meaningful signs of trend reversal to this bounce.

S&P has now managed to gain ground on 5 of the last 7 trading days from the bottom made back on 6/27 in late June.  Near-term momentum and breadth have improved, and NYSE All-stocks Advance/Decline is now back at new all-time highs.  These are encouraging signs, despite the lackluster movement in recent months, and structurally, we still haven't really seen much if any real weakness.  The drawdowns thus far into end of month have all caused fear to spike meaningfully, given understandably bearish reasons.. Trade war possibilities with the likelihood of expanding tariffs, and a Treasury market that doesn't seem to believe in the FOMC's thoughts of growth expanding.

Similar to the past five months, we've seen an early month rally which has now taken prices up to near levels hit back in June and March for S&P, while Europe has engaged in a counter-trend rally within its downtrend.  Emerging markets have shown some signs of bouncing of late, along with precious metals, while the Dollar showed a few signs of rolling over in recent days, outside of Monday's gains on BREXIT uncertainty with the resignation of two key members of May's cabinet.  While Tech and Financials have wobbled a bit, their pullbacks thus far have proven minute, and other sectors such as Healthcare, Discretionary, and Industrials have all come along to help cushion the broader indices. 

Into Tuesday, the rally is now growing stretched, and we're close to seeing intra-day Demark-based exhaustion on a few different timeframes.  Additionally, we see that Bond yields have only made minor progress higher in the last couple days, and over the last couple months have continued to drop, from 3.11 in mid-May, while dropping to 3% into mid-June and now lies near 2.86.  So Bonds have remained firm, while the yield curve has flattened.  Furthermore, there lies a key time into this coming late week that likely should provide a turning point yet again, similar to mid-June, and it's thought to be a minor high.  A couple key points to make here:  Breadth has grown more supportive of late, not less in recent days, with a number of 2/1 or above days of Advance/Decliners.  Second, the sectors we eyed for being at possible support, like industrials and materials looked to have bottomed and just in the last couple days we've seen a flight out of the Defensives, with sharp pullbacks in Utilities, REITS and Telecom.  So it's thought that while stocks might peak out again in the days ahead and make minor corrections, the structure of this Equity rally has not really given way, and has gotten more supportive of the idea of buying dips yet again for a rally from late July into August/September.


Additional charts and thoughts below.

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S&P has now reached price levels just shy of former peaks made both in mid-June and also in Mid-March.   Monday's close looked to have carried prices to within a few ticks below these prior monthly highs, (and in post market futures trading are now at 2792) while Daily Demark counts are 2-3 days away from showing exhaustion counts.  Thus, after nearly an 80 point rally from late June, prices look to be nearing their first meaningful area where they could experience some resistance to this rise.   While a move above 2800 would seem bullish to nearly everyone looking at charts of the sort, it's important to remember the trends in Financials and in Tech are both still suspect at this point, while bond yields have largely ignored this equity rally.  Historically, it's paid to bet on yields leading stocks, not vice versa.  So while longs in Energy, Healthcare and Industrials still look to be correct, one should consider selling into the Tech and Financials moves over the next couple days, or looking to sell into Europe (shown below)

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XOP, the Exploration and Production ETF, has advanced back to a new daily closing high as of Monday's close with XLE and OIH also making sharp rallies.  this sector looks to be underway in another decent rally after below average performance since mid-May.  Maintaining current prices into end of week would help XOP reach the highest weekly closing levels since mid-2015 which should bode well for this group to show further near-term outperformance.  Overall, longs in XOP or XLE both look attractive and pullbacks if any in the next c couple days, likely should offer a good opportunity to buy dips.
  

 Europe has been consistently weaker than the US and is now reaching resistance intoTuesday/Wednesday that should represent a good area to sell into gains and bet the other way for the back half of July.  One should consider VGK, or FEZ as being better shorts than SPY, as the US has held up in much stronger shape.  The area of 3475 up to 3505 for SX5E should be strong resistance near-term.

Gold Miners, Healthcare, and Treasuries look attractive w/ Tariffs On-Deck

July 6, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
269.88, 268.30-.50, 266.20-60, 263     Support
274, 274.49, 275.20-50                        Resistance


LINK TO TECHNICAL WEBINAR from yesterday- https://stme.in/ZcAsX0tbnS

 

SPX - (1-2 Days)- Neutral, looking to sell strength into next week and turning bearish under 2698.  Despite Thursday's rally, prices remain largely unchanged from the last week as part of the downtrend from mid-June.  Given the downturn in Financials and Tech, it's doubtful that S&P breaks out of this recent range to the upside and gains should be selling opportunities into 7/10-12.  Overall, trends remain negative since mid-June, and this recent churning is thought to be purely a short-term period of stabilization.  Breaks of lows on tariff concerns likely will accelerate.

SX5E- EuroSTOXX 50Mildly Bullish- Small rally to upside target at 3475-3505, so it's right to expect a bit more on the upside between today and early next week.  One should look to sell into gains into next week in SX5E.

HSCEI- Prices still at Make-or-Break near make-or-break- Prices closed up off early lowsHolding longs with stops on close under 10536-  If bounce is going to happen, it should get underway over the next 2-3 trading days but cannot violate 10536 without thinking a lengthier decline is in the cards.  For now this looks like a good area to take a stand.


Trading Longs:  ACN, TZOO, ENR, MRK, BSX, TEVA, REGN, WEX, GBTC, IYT, XLI, GLD, IAU, GDX, CSX, KEX, UNP, XOP, TLT

Trading Shorts:  SMH, LRCX, KBE, KRE, EWJ, LB, TSCO, CROX, IVZ, TBT, ZION, FITB, 


TECHNICAL THOUGHTS


ACTION PLAN-  

Short KBE with targets 46.29 initially, then 45.80
Short SMH with targets at 96.10
Short HG_F- Copper with targets at 263
Short EWJ, targeting 54.10
Long IYT, with targets at 192, stop 183.41
Long EEM with targets at 45, stops 42
Long XLV with targets 86.85
Long GDX with target 25.70 initially then 27
Long GLD with upside targets initially at 122, then 127.50



Sell any gains if given the chance into next week, thinking that rallies fail and turn back lower into late July.  Key date for trend change should arrive near 7/11-12 and then at end of month(which is thought at this time to be a low) 

No change to core thesis given Thursday's gains, as prices largely still remain largely range-bound with no directional bias since 6/26 as part of the downtrend from mid-June.  Momentum remains negatively sloped on daily and weekly charts, and it's thought that indices moving sideways ahead of Tariffs should allow for some resolution in the next 24-72 hours that will help to clarify recent congestion in many index and sector charts.   Financials and Technology remain in downtrends from mid-June, and over the last month we've seen these two groups along with Industrials and Materials show negative performance of greater than 2.5%.  So these four sectors account for greater than 50% of the market, and paint a bit of a different picture than that brought about by simply an unchanged market for the last few months.  It's thought that the ongoing resilience in Treasuries likely remains problematic for Financials to rally through and with the 2/10s Yield curve dropping down to 27.6 basis points, there remains little room before the yield curve goes negative, which peaked out shortly after the US election at 136 bps and more recently at ~78 basis points five months ago in early February.  The pace of acceleration seems to have quickened in the last week, so this remains something which many will be watching carefully.  Given the ongoing disparity between US stocks and what's been happening globally in many indices in developed and emerging markets, some evidence of stabilization and upturn in some of the key sectors that make up SPX with good volume and breadth will be imperative to having real faith in the markets being able to rally in the weeks and months ahead.  The official outbreak of Tariffs without a last minute backing off by POTUS likely would result in prices breaking down below the lows of the recent consolidation, and that remains something which should not be immediately bought into given the deterioration in momentum.   For now, prices remain range-bound and it remains correct to sell rallies.  

Outside of Tech and Financials, we've seen the start of some real outperformance from Gold stocks, and this area looks attractive for long positioning for those that are looking for alternatives and/or seeking to join in on the recent sector rotation.   Heading into mid-July, it looks right to favor precious metals, Treasuries, healthcare, and Commodities given the Dollar's downturn of late, while keeping a very tactical short-term leash on Equities in general in July.   Despite the minor pullback in implied volatlity in recent days, the VIX has gradually been firming in recent weeks, and this looks appealing going into what appears to be a very uncertain time with poor breadth, and lack of momentum at a time when multiple sectors have begun to fall by the wayside.  


Additional charts and thoughts below.


As daily New York Composite charts show, prices have closed each of the last 5th days of the month within 100 points going back since February of this year, a far more neutral, range-bound situation in benchmarks that are more representative of "the market" than the SPX, or NASDAQ.   The daily chart of NYA shows the uptrend from early April having been broken and now being retested, but for now the consolidation here requires waiting for more clues as to direction before making big upside bets.  Momentum remains negatively sloped and a pullback under last week's lows would likely jumpstart a period of downside acceleration that would necessitate a more defensive stance.  

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GDX, the Gold Miners ETF, broke out of a three-month minor downtrend yesterday, signaling the start of some likely outperformance in Gold miners at a time when Gold itself has reached key support near December 2017 lows near 1240 and shown some evidence of bottoming.  While XAU has not yet made the breakout that GDX has shown, it's right to follow this rally in the miners technically in thinking Gold stocks can outperform in the weeks ahead and a more serious downturn in the US Dollar while rates are falling should support the seasonal upturn in precious metals.  

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 Healthcare continues to strengthen, and the ratio chart of XLV vs SPX which we've seen a few times prior, broke out, consolidated and now looks to be turning up again.  Given the poor seasonal tendencies of Q3 in mid-term election years, Pharmaceuticals looks to be a sub-sector to favor in this environment.   At current levels, one should consider Healthcare as a much more attractive overweight than Technology in the weeks ahead given the risk/reward and recent evidence of this sector emerging.

Equities stable for now, but Financials, Tech breaking down a concern


July 5, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
268.30-.50, 266.20-60, 263          Support
273-273.60, 274.49, 275.20-50    Resistance

LINK TO TECHNICAL WEBINAR from last Thursday-  https://stme.in/x0uJXaiYRd
 

SPX - (1-2 Days)- Neutral, looking to sell strength into next week and turning bearish under 2693.  Prices remain within 3 ticks of closing levels from June 25th, seven trading days ago. Given the downturn in Financials and Tech, it's doubtful that S&P breaks out of this recent range to the upside and gains should be selling opportunities into 7/10-12.  Overall, trends remain negative since mid-June, and this recent churning is thought to be purely a short-term period of stabilization.

SX5E- EuroSTOXX 50- Mildly Bullish- Small rally to upside target at 3450-75, so it's right to expect a bit more on the upside between today and early next week.

HSCEI- Mildly bullish but prices near make-or-break- Holding longs though with stops on close under 10536-  If bounce is going to happen, it should get underway over the next 2-3 trading days but cannot violate 10536 without thinking a lengthier decline is in the cards.  For now this looks like a good area to take a stand.


Trading Longs:  ACN, ENR, MRK, BSX, TEVA, REGN, WEX, GBTC, IYT, XLI, GLD, IAU, GDX, CSX, KEX, UNP, XOP, TLT

Trading Shorts:  SMH, LRCX, KBE, KRE, EWJ, LB, TSCO, CROX, IVZ, TBT, ZION, FITB, 

TECHNICAL THOUGHTS
 

ACTION PLAN-  

Short KBE with targets 46.29 initially, then 45.80
Short SMH with targets at 96.10
Short HG_F- Copper with targets at 263
Short EWJ, targeting 54.10
Long IYT, with targets at 192, stop 183.41
Long EEM with targets at 45, stops 42
Long XLV with targets 86.85
Long XOP with targets at 46.50
Long GLD with upside targets initially at 122, then 127.50


Sell any gains if given the chance into next week, thinking that rallies fail and turn back lower into late July.  Key date for trend change should arrive near 7/11-12 and then at end of month(which is thought at this time to be a low) 
S&P has been able to weather the recent weakness in Financials and Technology, but the rally attempt after the pullback from mid-June has proven elusive with very light breadth on rallies while most of Asia has experienced much stronger selling pressure.   S&P now lies just a few ticks from levels seen in late June, seven trading days ago, so it will be importnat to keep an eye on this recent range, selling movement to the highs and buying dips, while recognizing that a break of lows should be used to adopt more defensive posture.   Given the stabilization in volatlity indices like VIX and ongoing decline in Treasury yields, these make it difficult to think rallies last any length of time before turning back negative given the downward bias of late with Tech and Financials.  So a couple cycles pinpoint 7/10-12 timeframe, but rallies into this area likely would occur on very light positive/or negative breadth, and should be a chance to sell gains.

It's important to recognize the extent to which most of the world has not followed suit to the gains in many FANG stocks of late, and Europe and particularly Asia have turned down pretty sharply.  Bonds look to have resumed the recent rallies and Credit spreads have shown some evidence of widening meaningfully for the first time all year.   Meanwhile, Copper, thought to be a key commodity to watch for economic forecasting, has broken down under recent monthly lows, violating a nine-month Head and Shoulders pattern.  The Base metals index itself has broken down under key support, while precious metals and cryptocurrencies have started to stabilize and move higher.  Overall, a defensive stance is preferred in what's thought to be one of the more potentially volatile months of the Summer. 

Additional charts and thoughts below.

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The hourly S&P chart shows a much more choppy pattern given Tuesday's pullback, which is increasingly resembling a consolidation pattern that could give way to further selling, rather than a Reverse head and shoulders pattern which initially was thought to be possible earlier in the week.  The area at 2747 will continue to be important over the balance of the next couple days into next week, with movement above likely occurring on very light volume and reaching a max of near 2760-70 before turning lower.  Conversely, under 2693 looks likely into end of July and should result in downward acceleration given the loss of momentum lately coupled with multiple sectors starting to breakdown.  

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Technology has shown increasing signs of following through on the peakout that was mentioned last month, and after two successive down weeks, the S&P 500 Information Technology index is likely to pullback to near its intermediate-term trendline near 1150.  As weekly charts show, Tech exhibited negative momentum divergence when it rose to its mid-June peak and then the break of this uptrend has given way to weakness which doesn't yet look complete.  Tech should be an underweight for the month of July, and lower prices are expected.  

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Bloomberg's Base Metals index has broken an uptrend going back since 2016 given the weakness in Copper, Zinc, and Aluminum of late.   Given the close at the lowest levels since 2017, this should pullback further in the days and weeks ahead.  Copper extended declines on July 4, trading down nearly 2%.  For metals exposure, it's thought that precious metals are a more preferred area right now than Base Metals
 

Short-term bottoming process has begun, with fear on the rise

June 29, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
268.30-.50, 266.60, 266                             Support
273-273.60, 274.49, 275.20-50,  276.72    Resistance


LINK TO TECHNICAL WEBINAR from yesterday-  https://stme.in/x0uJXaiYRd

 

SPX - (1-2 Days)- Mildly Bullish- Right to take a stand in this current decline with prices largely unchanged now over the last few days, but yet fear has steadily been on the uptick given the EEM deterioration while Tech stocks slowly but surely come back to life.  The move down under 2700 arguably was sufficient to satisfy the Elliott pattern from 6/21 and .suggests that at least a minor bounce can unfold.  While patterns on XLF and XLK remain dicey, the Industirals and Materials stocks along with Healthcare all look to bounce in the days ahead.  One should utilize rallies into mid-July as a chance to lighten up yet again and consider selling into. 

SX5E- EuroSTOXX 50Mildly Bullish-- Lows could be at hand in the near-term after this attempted pullback under May lows really hasn't gotten much traction.  Similar to the S&P this has largely gone sideways in recent days and has formed a TD Buy Setup as ofThursday's close.  Movement up over 3424 should drive this higher to near 3800. 

HSCEI- Bullish- Expecting snapback rally, and good to position long and add over 11118 for a move up to 12,000 potentially in the short run on a bounce.   Two different counter-trend buy signals are apparent, so its likely that the DXY stalls out, EM rallies and HSCEI follows suit.  

Trading Longs:  EEM, FXI, CQQQ, IYT, XLI, REGN, PFE, MRK, LLY, GLD, IAU, GDX, CSX, KEX, UNP, XOP, OIH

Trading Shorts:  IVZ, TBT, ZION, FITB


TECHNICAL THOUGHTS


ACTION PLAN-  

Long IYT, with targets at 192
Long EEM with stops at 42 and targets at 45
Long XLV with targets 86.85
Long XOP with targets at 46.50
Long GLD at 119 or below down to 118, with upside targets initially at 122, then 127.50
Covering KBE, SMH, SPY, VGK here and/or on any Friday weakness



S&P's reversal back above 2700 suggests the initial pullback from June 21st likely is in the process of being completed.  The snapback rally on Thursday helped sectors like Industrials, Technology, Financials all begin to stabilize and show above average gains, which suggests at a minimum that markets have a chance of trying to rally as the new Quarter begins ahead of the July 4th holiday.  Fear has been on the rise, with Total Put/call registering a 1.38, while AAII has flipped to Bearish  (more bears than bulls)  However it's tough making too much of current price action as being all that bullish just yet, as Thursdays rally failed to carry price up to levels that suggested an imminent rise can happen, and breadth was just fractionally positive.   Additionally, there was no major evidence of fear or capitulation at the lows (not that that's necessarily needed )   Bottom line, trying to buy into markets here is a definite work in progress, with Financials and Tech having rolled over sufficiently to turn near-term trends bearish.  Therefore, yesterday's snapback was just a temporary positive, but does fit in with seasonal cycles and some recent escalation in bearish sentiment which can be supportive of a bounce. 

Outside of S&P, its important to note that China's HSCEI, the Hong Kong Hang Seng Enterprises index, has logged two separate Demark related buys in the last day for the first time since late January, while Gold and EEM have also shown similar patterns.  This should allow for an above average bounce in the Metals potentially as well as EM stocks and currencies, as the Dollar turns back lower.  


Additional charts and thoughts below.

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The trend remains down, but yet some encouraging signs as S&P continues to find good support near the 2700 level on a closing basis, with prices largely unchanged now after the last three days, and seem to be setting up for at least a minor bounce into early-to-mid July.   Movement back over 2735 on a close would signify that this is underway, allowing for further gains.   Downside meanwhile should be contained at 2683 on pullbacks.   Given the fear levels rising in recent days, any move down under 2683 would result in capitulation and a larger trading bottom to buy into for a bounce into July before additional weakness.  While the bearish trend is unquestionable on daily charts, the risk/reward for shorts heading into end of quarter given the cyclic tendencies of late, seems poor.  Use pullbacks to cover shorts and buy dips if given the chance between now and Monday.  

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Transportation stocks likely should stabilize at current levels in the short run, after the DJ Transportation Avg sold off to key trendline support which has been tested now on two separate occasions since early February.   This area at 10307 has logged a TD Buy Setup, or nine consecutive closes where the close was less than the close from four periods ago.  Thursday's ability to close well up off early lows bodes well for this to attempt to rebound, and that's what's expected between now and mid-July after this selloff.  Movement down under 10,000 would be unexpected right away, and postpone the rally attempt.  

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 Fear has definitely been on the uptick in the short run, which is a definite reason to consider betting against this recent downtrend in stocks and considering that the first couple week of July could turn out like the last four months.  The Total Put/call ratio hit 1.32 as of Thursday's close, the highest since early April.   Over the last five years, the SPX closed higher 15 out of 17 times by an average of 1.88%, with the lone exceptions being August 2015 and January 2016 during steep selloffs.  (Stats courtesy of @MarketCharts)  Other gauges like AAII also show more Bears than Bulls now which just flipflopped this week, with 28.4% Bulls and 40.8% Bears.  The last occasion this happened this year was early April 2018, coinciding with a low and rally in the days ahead. 

Pullback in Financials, Tech should lead to a bit more weakness into end of month, but lows look near

June 28, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
269.10, 268.30-.50, 266.60, 266               Support
273.53-.60, 274.49, 275.20-50,  276.72    Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/y87RQhYBKd

 

SPX - (1-2 Days)- Mildly Bearish, but feel like near-term downside should be limited to 2683-5 before stabilization and bounce into early July.   As was the case with yesterday, 2735 and also 2747 are important areas on the upside to exceed, but do not feel like this move goes straight lower, so there should be an attempt to stabilize now in the next 2-3 days which allows for a counter-trend bounce to unfold.  Elliott wave patterns suggested a final pullback under 2700 should create a low and given the uptick in fear, im an initial buyer into end of week.

SX5E- EuroSTOXX 50Mildly Bearish-Look for another 1-2 days of weakness down to 3300-3350-  Ongoing underweight vs US and weakness has reached the lowest levels since early May, and should allow for another 2-3 days of weakness which potentially can reach 3300 before any low is at hand.  

HSCEI- Mildly Bearish, No Change- Looks to be 2-3 days away from support which could come about at 10900 down to 10750. HSCEI has nearly given back 50% of its entire rally since 2016, but is getting oversold, while being 1-2 days from generating counter-trend buy signals.  Overall, its likely initially that this first pullback should be a buying opportunity.    

Trading Longs:  GLD, IAU, GDX, CSX, XOP, OIH

Trading Shorts:  KRE, KBE, ZION, FITB, SMH, AMD, NVDA, LRCX


TECHNICAL THOUGHTS


ACTION PLAN-  

Short VGK with downside targets at 54.50-55
Short KBE with targets at 47.25
Short SMH with targets at 101.50
Look to cover shorts in SPY at 268.50-269, or on ability of SPY to move over 274.50
Long XLV with targets 86.85
Long XOP with targets at 46.50
Long GLD at 119 or below down to 118, with upside targets initially at 122, then 127.50



S&P's rally attempt ended with as vicious of a pullback as it began on Wednesday, a bearish development that suggests that a break of this week's lows likely happens into end of quarter before any stabilization.  Yields gave the initial warning sign yesterday, failing to confirm the rally in Energy and Industrials, and given the flat breadth which occurred during the initial morning spike coupled with a lack of participation from Tech or Financials, S&P failed to get up above the key 2747 area, and turned promptly lower..  quickly.   Breadth went from 3/2 down to -2.5/1 negative and 10 and 30-Year Treasury yields snapped key support, creating a strong downward pull on Financials which was followed soon thereafter by Technology and a give-back in Industrials strength.   The breakdown in yields likely can allow for further near-term weakness in Bank stocks in the upcoming 2-3 days, while Technology weakness also seems likely to continue.

However, there are some bright lights in the vicinity as fear started to ramp up into the afternoon and Equity Put/call ratio has begun to climb, while hourly S&P charts began to show evidence of positive momentum divergence on the pullback.  From a wave perspective, a break of 2700 should occur on worse negative breadth and better relative momentum and should give way to at least a temporary low in prices into end of month, not dissimilar from the past three months.  Overall, technically, there are reasons to temper the near-term bearish attitude under 2700 ahead of the end of quarter and into a seasonally bullish holiday period.  One should consider utilizing weakness Thursday/Fridayto lighten up on shorts and consider longs in Industrials, Materials, and Heatlhcare.   Addiiontally, Gold has gotten down to support and should also stabilize and begin to turn higher, which likely is accompanied by a weaker Dollar in the month of July.   Overall, while the trend has been weak, there are at least a few reasons to have optimism, but stock market rallies likely cannot happen as yields plummet to new weekly lows, which happened yesterday.   Yield targets for 10-year yields lie at 2.76% and should be an area to consider selling Treasuries into and after July 4th holiday for at least a minor bounce. 

Additional charts and thoughts below.

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The S&P rapidly reversed early gains after getting right up to early targets near 2747, representing the lows of the 1st wave down from 6/21.  The quickness with which prices fell into the close still didn't drag momentum back to new lows, however, and while the pattern over the last couple days is a negative, it's thought that any minor break below 2700 likely should be buyable, ideally near 2683-5 into Friday.  Positive momentum divergence is present, and sectors like Transportation stocks and INdustrials look to be close to trading lows.  Financials and Tech on the other hand still look to face 2-3 days of weakness near-term before any support and this alone warrants a negative stance.   Overall, it's thought that further weakness from here should lose strength, creating further divergences and setting up for a rally into July 4th holiday period.  

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The breakdown in Treasury yields was a clear negative for Financials on Wednesday, and looks to have further to go on the downside into end of week.  Movement from 2.83-4 down to 2.76% looks possible before any bounce, so it's expected that the breakdown in Banks likely has further to go in the short run.  Additionally, the shape of the pattern in Treasury yield charts also casts somewhat of a dim picture for July for Equities given how yields have largely led the move in Equities, so some serious stabilization and backing up in yields looks necessary before gaining too much conviction as to the quality of any equity bounce.  

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 The breakdown in Regional Banks (KRE) directly followed yesterday's deterioration in KBE, and the near-term Head and shoulders formation was violated as of Thursday'sclose.  The long-term trend for KRE since 2016 was also breached, so this presents a definite picture of the start of greater weakness in this sector.  Financials weakness seems to be directly coinciding with Strength in Treasuries, so as long as Yields fall, which in the case of 10, 30 year Treasury yields, looks to be likely in the next 2-3 days into end of month/quarter.  Pullbacks in TNX should reach 2.76% near-term, so KRE should get down under 60.70 , whereas into end of July might very well pullback to late March/April lows.