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Bond Yield breakout can accelerate further near-term- Will this spook stocks?

May 18, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2698-2700, 2682-3, 2666-7, 2649-52     Support
2730-2, 2741-4, 2747-9                          Resistance


LINK TO TECHNICAL WEBINAR from yesterday 051718- https://stme.in/MpyuOSOZca

 

SPX - (1-2 Days)- Mildly Bearish -Tough call here on a 2-3 day basis as US equities have been sideways for five days, but bond yields are breaking out around the globe and Technology continues to underperform- Many cycles pinpoint mid-June as being important, which i believe should be a low.  S&P should have strong resistance near 2730-41, and under 2700 would give conviction for the bear case

SX5E- EuroSTOXX 50Mildly bullish for a move up to 3600 into end of week where prices likely reverse.   Europe had led the rally higher, and should now be expected to fade and underperform in the weeks and months ahead. Upside minimal, but still tough to bet on immediate declines just yet. 

HSCEI- More bullish than bearish after downtrend break and recovery attempt over the last 6 of 7 trading days.  Areas to sell lie at 12800-20 while pullbacks down to 12150-12300 would offer an attractive area to buy dips.  

Trading Longs:   TBT, TYO, TMV, EUO, SYK, MOMO, EQT, EOG, TJX, ERI, SRS, DRV, ETFC, TROW, SCHW, AMTD

Trading Shorts:  LL, VNQ, XLU, AVB, ESS, UDR, SMH, VNO, AIV, D, ATVI, EXC, SRE, ITW, BLL, MAS, ABC, CAH


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY at 272.98, looking to add  to shorts at 273.50-274 with targets at 262-4
S
hort QQQ at 171.50-172.50, or on daily close under 167 targeting 162
Short SMH 106.23, with t
arget 100
Long OIH 27.33 with target 29.50
Long TBT 38.10 with target  41.25
Short XLU 50.19 with target 47.37
Short VNQ 77.42 with targets initially near 72


Many don't seem to be taking the bond move all that seriously, but we've seen a fairly major breakout in yields across most timeframes, not just in the US, but also abroad.  Bunds, Gilts have turned sharply higher coinciding with US yields spiking, and yesterday's move in the 30-year looks meaningful and has the potential to extend sharply in the short run.  So near-term, its not the stock market bringing excitement, but the bond market.  Whether or not this will bring about a selloff in stocks is difficult to say, but much likely depends on how sharply rates move in the days ahead.  Credit spreads haven't really budged lately, which is encouraging, but yet might start to widen out if/when implied volatility turns higher meaningfully which could be right around the corner.   Sentiment doesn't make the case for much of a lengthy selloff by any stretch, as CFTC data shows Speculators being more short in Treasuries than we've seen in at least the last 10 years.  Therefore, this likely equates to just a near-term sharp bond selloff that proves short-lived and should be buyable come early June (yields rise initially but then could pullback from June-September) The technical make-up of most charts however, shows this to be a meaningful move, not just in 5 and 10-year yields, but a very bullish Cup and Handle style base in the 30year (yes, still very much relevant) that has been exceeded as of yesterday.  So my expectations are for sharply higher yields over the next 5-7 days.  Whether or not this serves as a trigger or not, is difficult to say, but chart breakouts of some of the bearish Treasury ETFs like TBT suggest this can still likely gain ground in the week(s) ahead.  

Sector-wise, we did see attempts by the large-cap weighted Industrials ETF, XLI to break out of its downtrend from late January.  But yet again, Financials underperformed and were down on the day while the late day selloff in NASDAQ also looked to be a concern and largely offset the bullish moves in Small-caps or Industrials.  Given that Healthcare, industrials, Financials have been in downtrends, it just doesn't give much confidence to trust this tape right now, particularly given the low Equity Put/call ratios which have been hovering in the 50's.  (roughly 2 calls bought for every put)  It seems like investors are concentrating on the index breakouts, while ignoring some of the key sectors to this market which certainly have not been participating in a way that's all that inspiring.   The next couple weeks should shed some light as to whether large caps can rally to join the party we've seen lately with Small-caps, and for the bullish case, ideally XLF needs to get over $29 while seeing XLV eclipse 84.50 and XLK exceed $71.34.  That seems like a tall order between now and late May.

Additional charts and thoughts below.

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Patterns in Technology are looking increasingly more wobbly by the day, and the reversal in Technology Thursday with the NASDAQ closing down 0.50% could very well be the beginning of a more prolonged selloff in Technology.  For the S&P 500 Info Tech index, getting down under 1192 should prove problematic for Technology, resulting in further near-term weakness.  For the bullish case, this minor pullback needs to hold right away and turn up higher back to new highs.  This would entail a move back above 1234, which for now, might take some time.  

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The breakout yesterday in the 30-Year US Treasury Bond looks quite important for the back end of the curve, and could result in a rapid move up to 3.40% in yields given this technical structure.  This appears like a very bullish intermediate-term Cup and Handle pattern going back since 2015, and while many have thought that the 10yr being above 3% shouldn't be too big of a deal given Bullard's comments yesterday, the bond market looks to be doing the Fed's job for them.  A rapid move in yields into late May early June very well could have the effect of spooking the market if it happens quickly.  While this might prove short-lived given the bearish Sentiment in Treasuries, it looks wise to bet against Treasuries over the next couple weeks before reversing course, largely based on overbought conditions for yields and sentiment.   Breakouts in TBT as of yesterday, look to extend.  

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The LIBOR-OIS spread, or the spread between 3 month LIBOR and 3 mth Swap spreads, thought to be a good indicator of funding stress, broke out into early February before pulling back.  Technically however, this area near 43 bps appears to be very good technical support, and Daily charts show this spread to be within 2-3 days of bottoming given Demark exhaustion.  This could allow for stabilization and a turn back higher and will be something that many are talking about in the weeks to come if this starts to get anywhere near prior peaks from February.  But technically, the same factors which caused the breakout and acceleration on the move above two prominent former highs should now cause this to stabilize.  So, yes, utilizing Technicals in fixed income and Spreads can in fact be important.  

Favor Energy longs, while REITS, Utilities offer short opportunities

May 17, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2695-7, 2682-3, 2666-7, 2649-52     Support
2725-6, 2741-4, 2747-9                     Resistance


LINK TO TECHNICAL WEBINAR from last Thursday 050818- https://stme.in/7plbipwe92 
Today's Conf Call Webinar will happen at 1pm-EST- https://join.startmeeting.com/info69336

Dial-In Number (United States): (701) 801-1211, Access Code: 840-955-999

 

 

SPX - (1-2 Days)- Mildly bullish with a "Stop and Reverse" UNDER Tuesday's lows which turns the trend back to bearish- The rebound attempt after Tuesday's crack to multi-day lows lacked the breadth of a true recovery and Financials and Tech barely made any headway.  A small rebound back to Monday's highs is possible but momentum still likely to fade on any further bounce and setting up for pullbacks into late May.  

SX5E- EuroSTOXX 50Mildly bullish for a move up to 3600 into end of week where prices likely reverse.   Europe had led the rally higher, and should now be expected to fade and underperform in the weeks and months ahead. Upside minimal, but still tough to bet on immediate declines just yet. 

HSCEI- More bullish than bearish after downtrend break and recovery attempt over the last 6 of 7 trading days.  Areas to sell lie at 12800-20 while pullbacks down to 12150-12300 would offer an attractive area to buy dips.  

Trading Longs:  CMG, LVS, WYNN, MRO, EQT, EOG, NOV, OXY, TJX, ERI, SRS, DRV, ETFC, TROW, SCHW, AMTD

Trading Shorts:  LL, VNQ, XLU, SMH, VNO, AIV, D, ATVI, EXC, SRE, ITW, BLL, MAS, ABC, WMT, CAH, PCAR, MMM


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY at 272.98, looking to add  to shorts at 273.50-274 with targets at 262-4
Looking to short QQQ today at 171.50-172.50 targeting 162
Short SMH 106.23, with target 100
Long OIH 27.33 with target 29.50
Long TBT 38.10 with target  41.25
Short XLU 50.19 with target 47.37
Short VNQ 77.42 with targets initially near 72



Bottom line, yesterday's rally didn't accomplish much to think the larger trend might be saved from going lower, but it was a brief reprieve, and it can't be ruled out that US indices hold up into end of week before turning down next.  While Russell 2k broke out to new highs, the move happened on far lesser momentum while prices logged TD Sell Setups and Weekly signs of Demark exhaustion that might result in a fake breakout at a time everyone seems to be pointing out the move back to new all-time highs.  Materials led the move yesterday, while breadth came in around 2/1 positive, with Financials and Technology just barely finishing in the Green.   The two constants that were ongoing during Tuesday's selloff were still in place, that being US Dollar rising, along with Yields making headway higher.  Yet, equities bounced and gave most a sense of comfort.  A few things are important in this regard:   The downturn to multi-day lows was far stronger than yesterday's comeback.  Even on a mild move back above Monday's highs, this will create negative divergence and will be problematic.   The issues with the low breadth, poor momentum rally haven't changed, nor has the fact that Industrials, Financials, Healthcare all lie in downtrends.  So the volatility which is possible over the next few weeks doesn't look to be postponed.  Indices will need to show some real upside headway to alleviate these issues.   Of course there are a number of stocks pushing back to new all-time highs that are attractive to own, with tight stops, and so there remain opportunities to take advantage of, despite what's thought to be a slowly withering trend with poor risk/reward.

Some of these longs mentioned are within the Energy sector such as NOV, MRO, EQT, HP, as OIH gradually continues higher towards its retest of January highs.  Other sectors like Financials have shown stocks like UMBF, ETFC, TROW, IBKR, SCHW, AMTD demonstrating very good technical strength and should be ones to concentrate on.   However, given the rise in YIelds, sectors like REITS and Utilities have offered some attractive short opportunities and AIV, MAA, UDR, EQR, AVB, ESS, KIM, RPT, DDR, D, SCG, CNP, PCG, and SRE all look to move lower in the days and weeks ahead.  Overall, there should be opportunities for those seeking longs and shorts for now.  The next few days should bring more insight as to what kind of bounce we can see into end of week/or lack thereof, but it's still thought to be something to pare down longs into by end of week, thinking that 2730-45 should represent a maximum upside for this move before prices turn lower.  



Additional charts and thoughts below.

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Small cap Russell 2000 has just pushed up to new all-time highs, something which is a bullish development from a price perspective, and has allowed this to follow suit on what happened recently with the Small-cap 600 index (SML)  When looking at daily and weekly charts however, it's tough to just blindly buy this index's push back to new highs, as there lies the presence of daily, weekly and hourly, and 120 minute Sells on this breakout.  Additionally, momentum has waned a bit as might be expected given its minor stalling out near prior January and March highs before the breakout.  Overall a bullish move, but one to watch carefully as this might be prone to a false breakout as we near the latter half of May, so it pays to keep stops tight and not use this breakout as a chance to initiate new longs.  

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Energy continues to make upward progress, and OIH getting to within striking distance of January highs might lead one to think stalling out might be near.  However, in this case, the group has exceeded downtrends from early 2017 that make this move appear to have a bit more longevity.   While 29.50 is indeed an initial target, it's thought that this level likely is exceeded in the next couple weeks as this pushes even higher, with a likely max upside near $31.50.   The acceleration and outperformance of late keeps this sector in the "overweight" column technically, and should still be favored for good relative strength.  

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The BofA Merrill Lynch Global Fund manager survey sheds some light as to current positioning, and it's interesting to take note that Banks are the largest "LONG" in the survey, with Cash, and Discretionary close behind.  Given that Inflation expectations have begun to rise dramatically, along with the massive overweight in Banks, it's probably unlikely that the rise in rates continues too much longer (though for now, still seems to be ongoing and could reach 3.20-5%)  Meanwhile, it's a good idea to keep tight stops on Utilities shorts as these are also a group that is underweighted pretty dramatically in this poll, while the interest rate sensitive REITS are actually considered "Overweights".  Thus, fading the REITS is preferable to Utilities given sentiment, and we'll have to be on the lookout for signs that Healthcare is bottoming.  For now, the downtrend in this group on daily and weekly charts and relative charts is very much intact.  

US 10-Year Treasury Note Yields break out above 24-Year Channel Resistance

May 16, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2695-7, 2682-3, 2666-7, 2649-52     Support
2725-6, 2741-4                                 Resistance


LINK TO TECHNICAL WEBINAR from last Thursday 050818- https://stme.in/7plbipwe92

 

SPX - (1-2 Days)- Bearish- Yesterday's selloff happened within the key time of trend change, and should begin to lead indices lower in the next couple weeks.  Rallies on Wednesday would be used to pair down longs and/or consider adding hedges and/or implied volatility for what could be an above-average period of volatility into late May.  

SX5E- EuroSTOXX 50- More Neutral than bullish or bearish, but expect upside proves minimal and this joins US indices in weakening in the weeks ahead.   Look to sell rallies at 3600-15 while under 3530 should lead down to 3477 initially.  Unlikely to surpass 3659.  

HSCEI- Bullish but overdone and pullbacks down to 12150-12300 would offer an attractive area to buy dips.  Areas to sell lie at 12800-20- 

Trading Longs:  EOG, NOV, OXY, TJX, ERI, WYNN, SRS, DRV, MRO, ETFC, BAC, EUO

Trading Shorts:  LL, VNQ, XLU, SMH, VNO, AIV, D, ATVI, UAL, EXC, SRE, ITW, BLL, MAS, ABC, WMT, CAH, KSS, PCAR, MMM


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY at 272.98, looking to add  to shorts at 273.50-274 with targets at 262-4
Looking to short QQQ today at 171.50-172.50 targeting 162
Short SMH 106.23, with target 100
Long OIH 27.33 with target 29.50
Long TBT 38.10 with target  41.25
Short XLU 50.19 with target 47.37
Short VNQ 77.42 with targets initially near 72



US Equity indices looked to reverse on cue during a time this week when reversals were thought to be likely.  While breadth came in just 2/1 negative, volume did expand to the highest levels since last Wednesday, and many indices closed with price patterns seen as "island reversals" which are negative and should lead lower in the upcoming weeks.  Given that prices closed up a fraction from earlier lows, any attempt to trade higher into Wednesday/Thursday likely represents a chance to add to shorts and/or consider taking profits on longs.  Sector-wise, Energy remains one of the sole indices where longs are recommended, while Financials, industrials and technology all look to move lower.  One should continue to avoid and/or tactically short the yield sensitive sectors like REITS and Utilities as the bond selloff looks to have reignited .

The most important technical development for yesterday centered on 10-Year Treasury yields breaking out above 3.05%, and while they've been above 3% recently and didn't cause much equity volatility, this time around looked more important given the breakout in TNX above a long-term monthly downtrend channel that's been ongoing since the mid-90's, or 24 years ago, when yields peaked out in 1994.  The steeper downtrend from 1987 highs was broken a few months ago, but yesterday's breakout looked more important in getting decisively above 3.05% and mimicked what had occurred in 5-year yields just a few weeks prior.   30-year Yields look to be on deck for their own breakout and would take simply a move up above 3.23% before this joins suit and yields start to ratchet higher.  While sentiment is quite negative on Treasuries and monthly exhaustion signs are present on TNX charts which have marked peaks in yield in the past, neither the daily, nor the weekly charts show any confluence in this regard, indicating that near-term bond rallies likely should prove to be selling opportunities for Treasuries with yield targets up near 3.20% potentially or even 3.25% before yields face exhaustion and turn back lower.  This bond selloff certainly isn't a US phenomenon either, as weve seen similar movement in German bund yields and also UK Gilts.  Our thinking about selling yield based sectors remains very much on the front burner, and REITS and Utilities, not to mention Telecom might very well underperform over the next couple weeks until yields reach some type of resistance.  

Outside of equities and bonds, the US Dollar's sharp advance yesterday suggests there still lies a bit more upside here as well, despite how stretched.   Pullbacks in EURUSD might very well hit 1.17-1.1720 before finding support, while GBPUSD could reach 1.34%.  The combination of yields and Dollar rising should pose a problem for precious metals rallying, which typically underperform dramatically when USD and TNX are both rising sharply.  While the Dollar looks to be close to potentially reversing, it's not there yet, and yesterday's TNX breakout looks to extend, potentially into early June.  So in the near-term, stocks and bonds might both selloff in unison, making it difficult to find anywhere to "hide".  

Additional charts and thoughts below.

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Pullbacks in XLK yesterday mimicked the pattern seen on many indices with reversals to multi-day lows after their steep uptrend.  This had an effect on intra-day momentum weakening and in many cases, breaking the uptrend of the last couple weeks.   Any further rally attempt should be met with selling pressure as this will bring about worse breadth (Weve already seen negative breadth Monday on a positive day for indices) while Tuesday's action very well could just continue lower also.  Bottom line, one should consider taking profits in Technology and consider Energy to be one of the sole sectors left which maintains some signs of relative strength.   Tech, Industrials, Financials might all continue weakening in the upcoming 2-3 weeks given yesterday's reversal and the ongoing poor absolute and relative trends in these sectors.  

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Treasury yields broke out above late April highs yesterday, and as seen in monthly charts below, this had even bigger implications for the longer-term trend channel.   No counter-trend evidence of exhaustion was present, so near-term yield pullbacks would represent a chance to sell Treasuries, expecting higher yields into late May/early June before any peak.   Technically this looked to be quite the bullish move yesterday, so unless this is reversed completely, one should consider this a bearish move for Treasuries (bullish for yield that could provide some near-term acceleration higher in yields (and subsequently spook stocks given the quickness of this move) 

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Yesterday's bond selloff was truly important to the long-term structure in 10year yields, which broke out of long-term trend channels that had held yields intact since the mid-90s. TNX arguably broke out of a steeper channel from the '87 highs a few months ago, but this 24-year channel has held numerous rallies and declines, so the act of exceeding 3.05% from January 2014 put yields at the highest since July 2011, seven years ago.  Near-term, it's difficult to think buying Treasuries gets much traction just yet and near-term pullbacks in yield should represent attractive opportunities to sell, with yield targets north of 3.15 and potentially up at 3.20-5%.   TBT looked to have broken out on yesterday's move with the highest volume since mid-March.  This looks to continue higher near-term and dips should be opportunities to assume long positions in TBT into late May/early June. 

Negative market breadth provides key "Tell" to equity rally nearing completion

 

May 15, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2723-5, 2714-6, 2698-2701     Support
2741-4, 2748-50*                     Resistance


LINK TO TECHNICAL WEBINAR from last Thursday 050818- https://stme.in/7plbipwe92

 

SPX - (1-2 Days)- Mildly Bearish-  Reversal day expected Tuesday-Thursday of this week.  While Monday's highs can be surpassed by a fractional amount, it looks unlikely that 2750 is exceeded, and any move up to 2740-50 should constitute an excellent chance to sell rallies on Tuesday

SX5E- EuroSTOXX 50- Mildly Bullish- Last week has been largely range-bound.  Gains up to 3625-50 should prove to be maximum highs and right to sell into gains.  Unlikely to surpass 3659.  

HSCEI- Neutral- Movement up above 12361 needed for bullish stance-  Ongoing choppy range, but until US Dollar peaks out, this might underperform and trade range-bound a bit longer in the near-term. 

Trading Longs:  XBI, XPH, EUO, SRS, DRV, MRO, NOV, HAL, COP, OXY, ETFC

Trading Shorts:  LL, VNQ, XLU, SMH, VNO, AIV, D, ATVI, UAL, EXC, SRE, ITW, BLL, MAS, ABC, WMT, CAH, KSS


TECHNICAL THOUGHTS


ACTION PLAN-  

Small Short in SPY at 272.98, looking to add  to shorts at 273.50-274 with targets at 262-4
Looking to short QQQ today at 171.50-172.50 targeting 162
Short SMH 106.23, with target 100
Long OIH 27.33 with target 29.50
Long TBT 38.10 with target  39.25
Short XLU 50.19 with target 47.37
Short VNQ 77.42 with targets initially near 72



The fractional gains yesterday briefly turned negative before holding steady by day's end, yet breadth was negative on the day, a likely warning sign that further gains should prove muted this week, and movement to new highs likely will create divergences which could prove to be an excellent opportunity for profit-taking.  Overall, the rally should be stalling out this week and could happen between Tuesday and Thursday, so upside appears limited technically and one should hold off on getting too aggressive with longs into the middle part of May. 

Energy appears to be still one sector which can offer relative strength in the days ahead, yet Industrials, Technology and Financials all look to have limited upside.   The Industrials chart shown below is not all that different from the relative chart in Financials to SPX shown in yesterday's Weekly.  Both remain trending lower and last week's gains have failed to accomplish sufficient upside to think that these sectors are breaking out and/or that this rally is becoming more broad-based.   In addition, counter-trend signs of exhaustion per Demark indicators can appear as early as today to this rally, but ideally, would set up for an attractive area to sell at levels just above Monday's highs.  

Outside of equities, Treasury yields look to be climbing again, and this should offer a chance to sell the yield sensitive groups like Utilities and REITS, which likely won't offer much safety as long as yields keep rising.  As told in yesterday's Weekly Technical Perspective, both groups look likely to turn down sharply and should be avoided near-term.   

Additional charts and thoughts below.

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Industrials daily chart shows one of the main reasons why its premature to think this recent bounce has been all that broad-based.  Prices have not exceeded downtrends, either with regards to the Industrials sector, nor Financials, nor Healthcare and now look to be finding strong overhead resistance near areas that could cause a slowdown.  In the short run, it looks likely that Industrials should stall out this week and pullback after its rally over the last six of seven days.  Stocks like MAS, BLL, ITW, MMM, PCAR, AAL, UAL, R, OC, SWK all look to have weak technical patterns within the group and appear likely to stall and/or reverse in the days ahead.  

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Semiconductors breakout six days ago led to a quick rally in this group, yet now is showing evidence yet again of reaching levels that are important on the upside.  The daily chart structure has seen better days, and the pattern shows prices rallying to a likely lower high than having been made back in March.   Showing symmetry to this prior level from January, SOX will record a TD Sell Setup in Tuesday's trading on any close above the close from four prior.  These types of signals suggest a slowdown and likely reversal to this rally, and it's right to consider taking profits in Semiconductor stocks on this move and for aggressive traders, to consider shorting the SMH as a way to take advantage of Tech stalling out and reversing course.  Technology as a whole, which looked attractive two weeks ago, has now run a bit too far too quickly and looks vulnerable over the next 1-2 weeks.    

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Healthcare has shown a sharp snapback in recent days, with yesterday's advance over 91.90 in the Biotech ETF, XBI, being a positive, and targeting 95-95.85, and DRG index getting up to April highs also being a positive and should allow for another 1-2 days of gains in Pharmas.  However, the relative chart of Healthcare needs to see much more to have conviction that this sector can work and this recent move represents more than just a short-term bounce.  As daily relative charts show of Healthcare to SPX, the group peaked out last September and its October breakdown under support resulted in a fast retreat which thus far has not really been recouped.  This has required a much more selective approach to sticking with strength,  and trying to avoid buying weakness too quickly.   This will be the key chart to watch in the days ahead for this group, the S&P 500 Healthcare index vs the SPX.  Breaking out above this downtrend would warrant overweighting.  For now, one likely should consider selling into this group on Tuesday/Wednesday on movement in XBI, DRG to the levels mentioned above.  

Technology, Aerospace/Defense, Energy favored, while avoiding REITS, Utilities

May 9, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2660-2, 2650-2, 2631-3, 2591-3      Support
2681-2, 2690-1, 2710, 2718-9       Resistance


LINK TO TECHNICAL WEBINAR from last Thursday 050318-https://stme.in/p0sloRP6EO

 

SPX - (1-2 Days)- Bullish-  Rally to test the more important 2717-9 looks possible from mid-April which should be a make-or-break for Longs, getting above leading to a more meaningful bounce.  5/7-9 was listed last week as an area of importance, so be on watch for signs of trend reversals, or for trend acceleration during this time.   Until Technology turns down, it's thought that recent relative strength in Tech likely carries this market higher

SX5E- EuroSTOXX 50Bullish-   Gains up to 3659 look likely for SX5E, and early to sell into strength.  Europe leading SPX in strength near-term.    

HSCEI- Neutral- Movement up above 12361 needed for bullish stance-  Ongoing choppy range, but until US Dollar peaks out, this might underperform and trade range-bound a bit longer in the near-term. 

Trading Longs:  RHT, CRM, COUP, SPLK, AKAM, ROST, ETFC, IBKR, TWTR, NOW, SU, NOV, COP, OXY, CSCO, ENTA, 

Trading Shorts:  VNQ, VNO, CAH, URBN, BBBY, KSS, TAP, LL


TECHNICAL THOUGHTS


ACTION PLAN-  

Long SPY with targets near 271
Long OIH 27.33 with targets 29.50
Long XLK 68.11 with targets 70.31
Short VNQ 77.42 with targets initially near 72
EURUSD and GBPUSD both look to trend lower over the next 3-5 days.  The risk/reward might not seem ideal, but former longs were stopped last week and it still looks like these trend down to <1.18 and 1.34 respectively before bottoming, potentially sometime next week.  


Not a very comforting market given the ongoing Bull/Bear struggle, but it's important to pay attention to the sector rotation during choppy times, and in this case, Technology seems to be weighing in on the side of the Bulls in the short run.  While there's only so much that this sector can do to lead when other groups are underperforming, markets did show some evidence of stabilization in the Industrials with Aerospace and Defense rallying post Iran Deal pullout, while Energy seemed to stabilize and turn higher as well as the fears of remaining in the Iranian deal proved unfounded.   While Energy might not face more than another 3-5 weeks of outperformance and rally, it certainly doesn't seem over given Monday's reversal attempt.  WTI should still trend higher to near $72-$73, and OIH, XLE should both make upside headway, and are right to stay long.   Financials has bounced in recent days, and while relative trends remain negatively sloped, it still appears like a bit more upside can occur in this group as well.  Overall, given that equities have neared a time when trend change was thought possible, it's right to be on high alert for the balance of this week for any evidence of either trend reversal , and/or acceleration out of this range which has dominated equities since January.

For now, the US Dollar acceleration still seems to have more to go, with EURUSD likely falling beneath 1.18 briefly while GBPUSD could also see more weakness in the coming 3-5 days before this stabilizes and bounces.  Rates, meanwhile have turned higher which has caused some real underperformance in the Utilities and also REITS lately, the latter group which seems to be prime for shorting for aggressive traders, expecting that rising yields will start to have a greater effect than has been seen over the last month.  Emerging market currency weakness also looks to persist in the short run, and is something to also watch carefully which might become an eventual problem for markets, as we've seen some pretty major acceleration lower in many EM countries currencies and this might very well stem their recovery efforts.   More on this below.  


Additional charts and thoughts below.

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S&P continues to teeter on the brink of a very big Fight between Bulls and bears that hasn't been won by either side at the moment.  Yet, the Bulls appear to have taken a certain advantage over the last couple days, and Tuesday's close well up in the range following Trump's speech on the Iranian deal looks to have helped Energy bounce back, while providing some ammunition to the Aerospace and Defense sector for Industrials.  At present, the pattern supports the idea of a bit more strength which could get above 2682 up to near 2710-8 before any peak near the larger downtrend from early January.  But the act of getting above this would be equally as impressive and a short-term bullish development that can't be ruled out.  Conversely, dropping back down towards last week's lows would be decidedly bearish, given how much momentum has begun to drop off lately.   Overall, markets appear headed for a big crossroads in the next few days and important to watch these trends carefully, along with volume and/or evidence of breadth acceleration or lack thereof.  For Wednesday-Friday, it still looks right to stick with a bullish stance given Tech's positive influence while Industrials and Financials are attempting comebacks.  
 

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Technology's resilience over the last week and todays' close at the highest level since mid-March for XLK should keep markets intact for now, as Large-cap Tech's influence on the SPX cannot be understated.   Counter-trend tools suggest that at least another 5-7 days of rally are possible to this move and could bring about a test of levels near 70, which would likely be bullish for stocks into 5/17-20 before any peak.  For now, Tech is a lot more positive than the broader SPX appears technically, but an important anchor that carries some major weight and should be factored into SPX analysis.  IN this case, from a short-term bullish perspective, for now.  
 

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Emerging market currencies have plunged of late with 18% declines in Argentinian Peso vs US Dollar and steep losses in the last few days in the Turkish Lira also vs USD.   Argentina has asked for an IMF Flexible credit line, which might give it some comfort, but might not be all that effective in stemming the selling.   The country has hiked rates three times in the last 10 days to 40%, the highest among developed countries.  The real question, however is whether a currency crisis could be approaching given the rapid acceleration lower in many EM countries.  The Turkish Lira and Argentinian Peso are just two examples, but the Brazilian Real looks extraordinarily toppy on monthly charts (USDBRL bullish) and is something to keep a close eye on given recent Dollar surge of late.   The JP Morgan Emerging Market Currency index looks to have made a rather substantial break of this uptrend from 2016 that had been in place for this index, and the peak arrived right as US equities topped out on January 26 this year.   Near-term, this looks to bring about further selling pressure for emerging market currencies, and should be watched carefully for signs that it begins to stir up concern in global asset markets.  

Despite late day Energy pullback, Technology, Financials show strength

May 8, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2660-2, 2650-2, 2631-3, 2591-3      Support
2681-2, 2690-1, 2710, 2718-9       Resistance


LINK TO TECHNICAL WEBINAR from last Thursday 050318-https://stme.in/p0sloRP6EO

 

SPX - (1-2 Days)- Bulish-  S&P closed down at important hourly support near Tuesday'sintra-day lows, but structurally, momentum along with the broader trend, is getting worse.  a defensive stance is preferred, with breaks of 2623 resulting in an immediate test and break of 2611 on its way to the mid-2550's.   

SX5E- EuroSTOXX 50- Bullish-  Further gains out of Europe which is continuing to move at a quicker pace than S&P- Expect eventual move up to 3659 in SX5E

HSCEI- Neutral-  gains in the US Dollar seem to have held back HSCEI, and for now, prices still choppy and rangebound over the last month-  Pullback to lows of one-month consolidation looks likely and a test of 11750-11800.  Over 12361 now needed to think trend is turning back higher.  

Trading Longs:  ETFC, IBKR, TWTR, NOW, NOV, COP, OXY, CRM, RHT, SPLK, CSCO, ENTA, 

Trading Shorts:  CAH, URBN, BBBY, KSS, TAP, LL


TECHNICAL THOUGHTS


ACTION PLAN-  

Long SPY with targets near 271
Long OIH 27.33 with targets 29.50
Long XLK 68.11 with targets 70.31
Long GLD  124.59 with targets 128.36 initially


Equities managed to push higher above 2670 and briefly hit 2682 resistance before settling, but managed to give back gains following Trump's mid-day tweet Monday.  Despite the mid-day selloff, trends remain positive and should continue to extend in the next couple days.   The positive devlopments of exceeding this downtrend outweigh any negatives into the close, and breadth still finished around 2/1 positive.  While Energy pulled back from earlier gains, both Tech and Financials managed to extend greater than 0.60% and this is thought to be positive for markets given these sectors heavy weightings.  

Thoughts on S&P, OIH and EWG below


Additional charts and thoughts below.

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S&P broke out above the downtrend from mid-April and got up to, but not over resistance at 2682 that was thought to have some importance.  this area near late April highs remains a significant level to overcome, though trends don't show sufficient evidence of rolling over to think Monday's minor intra-day pullback was all that important.  Thus, it remains a positive day in having gotten up above this downtrend, and right to stay long into Tuesday/Wednesday of this week.  Above 2682 lies 2690 and then a move to challenge mid-April highs might be possible before reversing course.

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WTI's spike higher above 70 faced a mid-day about face, but still closed up above highs of the last couple weeks and as OIH shows, this move still achieved a minor breakout, despite the extent of the pullback intra-day.  It's right to be long energy, expecting further upside, and Trump's press conference to discuss at 2pm on Tuesday should provide further details.  When not considering Trump's actions, but looking purely at OIH and WTI, this still is a bullish move and warrants being long. 
 

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Europe, and in particular, Germany, has turned up sharply in recent weeks and still looks to have upside potentially to near former highs.  Long positions are preferred in EWG, thinking that German equities might have upside to near 13,450 in DAX from current 12948.  Momentum is not yet overbought to the levels that suggest selling, while Demark counts remain 3-4 days away.  Thus, a close near the highs of the day is constructive to buy EWG, expecting near-term gains.  

Technology relative Breakout bodes well for additional early week gains

May 7, 2018

S&P JUN FUTURES (SPM8)
Contact: info@newtonadvisor.com

2654-6, 2638-40, 2611-12, 2584-5, 2549-53   Support
2663-5, 2680-2, 2718-19, 2725-6, 2739-40       Resistance

 

S&P Information Technology index relative to SPX-  Relative trends for Technology never really broke down even on the pullback from mid-April in Equities and Tech has outperformed over the last week and the last month, not to mention YTD, a constructive sign for a sector that represents a heavy 25% of SPX.  While issues remain with trends and momentum in SPX, we'll take a glass half full approach to studying what stocks should be able to make further gains as Tech looks to strengthen further.  

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Summary:   NO conviction here, as last week's late week rally was in fact encouraging when viewing Technology outperformance, along with recent signs of European indices and Asia rallying. Yet US trends are still under pressure based on ongoing downtrends being intact and continuing negative breadth and momentum.   Seasonality also suggests the next few months might be challenging given past history, so it's difficult to take one day's rally and make too much of it.   Technically its right to make short-term tactical decisions with stock indices within consolidation ranges and until this changes, and/or we see evidence of more sector participation outside of Technology,  the market is unlikely to extend too much further, though also likely does not crash (given Credit holding up and not having widened out too dramatically.)  The repeated tests of the 200-day average likely will start to lose effectiveness the greater the amount of the tests.  Overall, a shorter-term duration and tactical "hit-and-run" mentality is needed for trading, while trend following investors need to respect when intermediate-term trends begin to give way.  

Bottom line, this remains a difficult market, both for bulls and bears alike.  Technically it was right to come into last week with a more defensive tone.  Yet Friday went very much against that view, ratcheting up above the minor four-day trend to close at multi-day highs.  So now many are wondering yet again.. Are the lows in?  Is it safe to buy?   Technically, one needs to look no further than the Daily SPX chart with all its ongoing downtrend, volatility and swings, mostly to the downside since January to say simply, it's still very difficult to have a lot of conviction on the long side, despite this having been wrong last Friday.  Anyone who tells you differently likely experienced a very difficult time in making money over the last few months.  Yet with everything, there remains both positives and negatives in this market which i think are important to reiterate to try to make sense of this recent consolidation range (and a few more positives to mention after last week.   Initially, let's cover whats still a concern  

1) Trends and momentum are both negatively sloped.  Despite last Friday's lift, popular technical indicators like MACD are still negative both on daily and weekly charts.  SPX prices have not yet broken out of the downtrend from January, nor Mid-March peaks, much less from mid-April, when markets peaked out on 4/18
2) Breadth remains challenging-  Only 47% of stocks are trading above their 50-day moving average, and as we all have heard, the percentage of stocks down off their 52-week highs on average is in much worse shape than the indices
3) Lack of capitulation/fear at the lows last week.  While sentiment has become more subdued given recent drawdown, we've yet to see evidence of high volume into Down vs Up stocks driving high TRIN readings that could mark a low.  Put/call ratios were levels seen in early April in the mid-70s (elevated but nowhere near Feb's .88 reading on Equity put/call or last Augusts .94 reading.  They plunged an exorbitant amount into Friday's close down to .55 on a single day reading, the lowest since mid-March.  It's unlikely that investors have begun to snatch up calls at a high rate at the bottom and are correct.
4) Financials remain under pressure, and along with Healthcare and Industrials have been sharply underperforming this year, all three down over 2%, and also lower by over 1% during the rolling 30-day period.  Industrials actually is down -2.57%.  These three groups represent 38.4% of the market, nearly 40%.  A very large percentage controlled by three groups which simply aren't working well right now.  
5) Defensive outperformance remains a possible concern for equities.  REITS were one of 4 sectors higher last week, up 0.95%, while Utilities outperformed Industrials, Financials and Healthcare.  This of course comes at a time when US 10YR Treasuries yields have been hovering just shy of 3% and have not backed off too dramatically. 
6) Seasonality remains a concern during the Late Spring/Summer months in Mid-Term election years and since 1950, trends show a decidedly negative bias between mid-April and October during these years. 

And what's positive?
1) Technology needs to be emphasized how resilient this sector has been of late in continuing to show outperformance both on a YTD basis as well as short-term, with last month's rolling 30-day returns showing this group outperforming every other sector besides Energy, with returns of 3.93% for the month, vs 0.71% for the SPX.  While Semiconductors deterioration had threatened to derail technology's run, as of yet, this doesn't seem to have happened.
2) Credit spreads still don't show much concern in terms of when viewing High yield spreads to 5-Year Treasuries (benchmark) which now are trading 343bps over (near the same levels as they started the year) So while credit has shown some minor widening in the past couple weeks, this hasn't been sufficient to warrant concern (as of yet) 
3) Europe and parts of Asia have turned up along with the US from early April, yet failed to turn back down at mid-month and have actually continued higher.  So there lies some divergence here where other developed countries have been acting much better of late (despite European economic conditions having worsened (Germany))
4) The pullback markets experienced most of the last week until Friday lacked a lot of meaningful negative breadth like what would be expected on a serious correction.  Friday's "sitting" near Thursday's highs when a selloff very well could have happened, and then turning up above 2631 caused a short squeeze for Friday and resulted in strong tech outperformance with AAPL moving back to new highs. 

So the net result of all this isn't all that satisfying.  Markets remain in consolidation since January and have not proven that this is over, and predicting that breakouts can happen with lack of proof in exceeding trends while a number of sectors are showing very sub-par performance just doesn't give all that much conviction.  Yet, longer-term uptrends from 2016 remain very much intact.  So despite some underperformance and deterioration in individual stocks, indices have held up and it's right to have a more tactical approach, until breadth and momentum improve.

We'll finish with a small discussion on Earnings, since many have been wondering why earnings are so bullish (and even arguably geopolitical tension is easing, yet stocks just can't rally?  As many know,  earnings aren't necessarily the driver of stock prices. If anything, it's the stock market that tends to lead the economy.  From Robert Prechter's book- "The Wave Principle of Human Social Behavior and the new Science of Socionomics"- "Since 1932, Corporate profits have been down in 19 yrs.  The DJIA rose in 14 of those yrs. In 1973-4 the DJIA fell 46% while earnings rose 47%.  Actually 12-mth earnings peaked at the bear market low. Earnings do not drive stocks"

Furthermore, in a June 1991 Study- Wall Street Journal reported on a study by Goldman Sachs' Barrie Wigmore who found that only 35% of stock price growth (in the '80s) can be attributed to earnings & Interest rates.  Wigmore concluded that the rest is simply due to changing social attitudes towards holding stocks


SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days):   Bullish-  Last week's Technology outperformance could help to lift equities further earlier in the week, as this remains 25% of the market and just made a bullish breakout relatively speaking.   While trends remain negatively sloped and prices are now near the downtrend from mid-April,  its thought that some further near-term gains are possible before any selling resumes into June/July.  Futures as of early Sunday evening had lifted up to 2670, and into Monday, there's not much resistance between here and 2682, while over this could allow for brief push to challenge mid-April highs near 2718.   However, it's a concern that just one group seems to be doing the heavy lifting while much of the market has been lagging.   We'll need to see Industrials and Healthcare, not to mention Financials, start to stabilize and turn up before thinking this is anything more than just a short-term continuation to last Friday's move.  However, to start this week, we'll look for this rally to continue a bit more, and use any pullbacks to 2640-50 to buy.

Intermediate-term (3-5 months)-  Bearish-  Trends and momentum remain negative and markets are entering a seasonally bearish period for mid-term election years that normally sees trends turn lower into September/October before late year strength.  While Technology is indeed a positive, other sectors like Financials, industrials and Healthcare have all been dragging substantially and are a problem for a market desperately seeking leadership.  The lack of breadth and market momentum suggest this market still could be vulnerable to a late Spring "shock" given that sentiment isn't all that pessimistic while the participation and trends remain in less than optimal shape.  Movement down under 2550 would be a concern for a test of 2450, but this likely proves to be appealing initial support to buy into on any correction over the next couple months.    


TECHNICALLY ATTRACTIVE STOCK IDEAS WITHIN TECHNOLOGY:   
This week we'll take a look at some of the more attractive stocks within Technology which still look to strengthen from a technical perspective.  So despite the negative trend for Equities as a whole, these stocks might offer a an attractive risk/reward for those looking for technically based long ideas.  


LONGS:  CRM, CDW, COUP, TWTR, PANW, RHT, AKAM, SPLK, FLIR, and CSCO




Salesforce.com Inc.- CRM- Ongoing strength and push to multi-week highs bullish

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Salesforce.com Inc (CRM- $125.12) CRM continues to show some of the more attractive technical structure within most of Technology. The stock's acceleration into early 2018 was followed by just a minor pullback before pushing back higher to multi-week highs last week.  The plane of ascent has steepened in the last few months, and should allow for continued gains up to test and break former highs near $130 in the days/weeks ahead.   Until this breaks its uptrend and/or shows some evidence of weakening structure, this should be favored and held long for movement back to new highs.  

CDW Corp (CDW- $75.52) The ability to have exceeded the highs of this consolidation in the last few months is thought to be constructive and should bode well for further gains up to $80 in the weeks ahead.  Ranges of this sort which are exceeded on heavy volume typically prove to be bullish to the overall structure and should allow for additional strength in the days/weeks ahead.  Only a move down to undercut the recent gap would postpone the rally.  

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Coupa Software (COUP- $50.46)  COUP's ascending triangle pattern over the last month bodes well for an upside breakout and acceleration in the weeks ahead, and long positions are recommended technically looking to add to longs on evidence of a breaking back above the intra-week highs.  Tight consolidations of the sort which follow steep ascents typically allow for further gains, and given the face that COUP tested the initial highs once already, the act of making higher lows and then revisiting this high yet again is a very bullish development that normally suggests owning and buying more as this attempts to breakout.   Only on a move down under $46 would this bullish thinking be postponed.  At present, its right to favor an upcoming breakout and further gains to the mid-$50's.
 

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Twitter (TWTR- $31.04) While the stock remains more than 10% off its highs from March, TWTR remains technically attractive from a risk/reward perspective here given the pullback to trendline support from last October lows.  Given the reports of active Call buying in the shares last week which drove the stock up to new multi-day highs, it looks attractive to position long for a rise back to $35-$37 with stops under recent lows near $28.  Given the upside projections and failure of TWTR to make any meaningful trend violation, one should look at shares as being an attractive technical risk/reward and buy TWTR technically for a push higher to test highs made just two months ago.  Breaks of this uptrend would cancel out any positive stance, but for now is unlikely. 

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Palo Alto Networks (PANW- $195.36) PANW's ability to make a new multi-week closing high should allow the stock to begin some acceleration now that 2015's highs have been exceeded as well.  PANW took just one year to retest highs which took nearly 2 years to consolidate, yet the pattern remains quite bullish and PANW should be favored for further gains, with targets up near $215-220.   These kinds of wide bases following lengthy rallies are typically quite bullish for the prospect of further gains, and it's typically wise to monitor when stocks manage to get back to new high territory.  Overall, technically speaking, PANW looks like a great stock to own and buy dips while using movement back above $197 to add to longs even more for acceleration given that this would represent the first move back to new highs in over two years. 

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Red Hat (RHT- $166.10) Ongoing higher highs and higher lows with a lack of counter-trend sells being confirmed should allow for even further gains in RHT with technical targets found near $180.   As this weekly chart shows above, the stock began an even swifter advance to its ongoing uptrend a couple months ago, and has made four straight weekly intra-week highs above the prior while also achieving new higher weekly closes.   Momentum has been overbought for the last few weeks, but the act of challenging the highs from mid-March should allow for even higher prices in the weeks ahead before this shows any evidence of peaking out.  Pullbacks to violate this uptrend, currently near $157, are needed to consider reducing exposure.  

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Akamai Technologies (AKAM- $72.01) The act of exceeding an area of consolidation going back since 2015 is considered quite bullish for stocks like AKAM, and additional gains are likely up to test and exceed the area near all-time highs just below $80.  The stock's ability to get back over this area in the high $60's which at the time late last year looked to represent a multi-year symmetrical triangle pattern was considered to be quite bullish on an intermediate-term basis.  The stock rose to the high $70s before backing off and consolidating and now looks to be attempting to push higher yet again.   Longs favored with initial targets near $80 and movement over that level likely given the symmetry and pattern development.  

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Splunk (SPLK- $107.25) SPLK's recent consolidation in the last month happened to occur right near prior all-time highs back in early 2014 when this first made all-time highs before pulling back more than 50%.  The long-term pattern remains quite attractive after its acceleration late last year, and the act of rising back to new multi-week highs last week looks to have broken out yet again after having formed a recent minor triangle pattern to consolidate gains.  Movement up to $120 looks likely technically, and its right to own SPLK and use dips to buy, thinking that recent upward progress should continue in the weeks ahead. 

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FLIR Systems - (FLIR- $54.52) Additional gains to the high $50's look likely for FLIR after having made a successful breakout of the highs made back in January.  The stairstepping pattern in the last month is particularly attractive, as the stock has taken a slightly quicker path of acceleration higher and last Friday's gains in particular should lead up to near $56 without too much trouble.  One should use pullbacks under $54 to buy dips, and continue to stay long FLIR providing this recent ascent continues and its breakout leads to further movement higher.  Momentum remains positively sloped and not too overbought, and long positions remain correct unless this were to undercut $52, which doesn't seem likely in the immediate future.  
 

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Cisco Systems (CSCO- $45.30) The basing pattern since February of this year looks to be setting up for a push back to new high territory, and last Friday's gains in particular are a positive in having exceeded the highs from April, helping CSCO to reach the highest levels since early March.  Given the long-term bullish structure in this stock, the rise since last August's lows looks to have made just a partial consolidation after it rose 50% in about six months' time.  The decline from March into early April was immediately recouped which is thought to be a real positive and gains are likely to the high $40's before much additional resistance comes in.  The risk/reward in CSCO's case is quite attractive given this consolidation and downside risk is pretty easily quantified.  Only in the event this gets back under $43 would gains be postponed, while last week's gains are thought to lead directly back to new monthly highs.  

Yesterday's snapback very likely not sufficient- Financials weaken further

May 4, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2600-3, 2562-5, 2552-3, 2529-31       Support
2619-21, 2648-9, 2666-8, 2675-7       Resistance


LINK TO TECHNICAL WEBINAR from yesterday 050318-https://stme.in/p0sloRP6EO

 

SPX - (1-2 Days)- Bearish-  S&P closed down at important hourly support near Tuesday'sintra-day lows, but structurally, momentum along with the broader trend, is getting worse.  a defensive stance is preferred, with breaks of 2623 resulting in an immediate test and break of 2611 on its way to the mid-2550's.   

SX5E- EuroSTOXX 50- Minor stalling out should still prove buyable as no real weakness has occurred and SX5E still meaningfully stronger in the short run than US. Expect eventual move up to 3659 in SX5E

HSCEI- Bearish-  Pullback to lows of one-month consolidation looks likely and a test of 11750-11800.  Over 12361 now needed to think trend is turning back higher.  

Trading Longs:  NEE, ETFC, IBKR,  DNKN, YELP, TWLO, HQY,ENTA, 

Trading Shorts:  ABC, LL, C, WFC, USB, HOLX, GILD, UTX, ITW, HOG, CBS, CMCSA, VIAB, LUV, SMH, AMAT, MCHP, NTAP, IBM, BBBY, EMN, MNK


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.
Long GLD
 under 123.75 , with expectations of a rally back to near 128.36 initially
Long DBC for commodity exposure- targeting $17.85
Long XLU with targets at 52.40
Short XLI with targets 70.25
Short XLF with targets
Short IYT 187.62 with targets at 181.50
Short SMH with targets adjusted downward to 92.50
Long EURUSD 1.1995 with expectations of a bounce back to 1.2150

Exiting TLT after yesterday formed a bearish reversal which could allow for a retest of lows before more upside


Equities selloff does not look complete, and the late day bounce should prove to be sellable, expecting further lows into next week before any meaningful area of support.   A few key reasons come together why it's wrong to assume long positions on a reversal day like we saw yesterday.  First, momentum and trend remain sloped lower and prices failed to even make it up above the prior day's highs.   Second, timing based cycles of importance based on Gann and Demark both focus on next week as being more important than yesterday for any sort of low, and signals are incomplete on daily charts.   Third, there didn't seem to be much evidence of fear and/or capitulatory selling on this decline.  Breadth was a mild 2/1 negative, potentially being a bit more favorable given the Technology resilience.   Fourth, the action in Financials simply in breaking down to the lowest levels of the year is simply not a positive and something to buy into just yet, despite the late reversal higher here too.   This group remains under pressure.  Finally, Industrials remains weak technically, and fell today despite the rally, while no meaningful flows into defensive sectors occurred.   

Overall, the fact that bond yields broke down near 4/24-5 similar to Equities looked to be important, and both yields and stocks seem to be tracking each other fairly closely of late.   Both bottomed in early April and rallied and now both are selling off.    i..e Bonds rallying as stocks decline.   Meanwhile the Dollar's rally is having a hard time peaking, and still might take a few days before turning lower.  Commodities have attempted to bottom, but the real action in this group is being seen in the Grains, with Breakouts lately in Corn and also Wheat yesterday, while Soybeans has been basing, and looks to be next in line.   Overall, a fair degree of selectivity in this market is still prudent and it's best to stay long Bonds, long commodities, and short stocks for the time being, until further evidence is seen.  The Dollar seems close to turning, but more proof here is needed. 

Additional charts and thoughts below.

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S&P broke support at 2623 early on, which gave way to rapid selling down under 2600 briefly in Futures before rebounding back to close only partially negative.  While a "Hammer" pattern ordinarily might be considered a positive, the lack of exhaustion present, coupled with cycles still being somewhat early for a low and the face that no real capitulation was seen at yesterday's lows all combine to suggest that a bit more downside still needs to happen into next week before any serious low.  The right play seems to be hedging and/or selling short for a move lower over the next 3-5 trading days, and then covering shorts.   The 200-day moving average is indeed present, but the number of tests this has had literally makes this very unreliable to consider as meaningful support, and should be violated going into next week before being regained, in my view technically.   
 

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Financials turned down to the lowest levels of the year, per XLF early on in trading yesterday, before rebounding to close only fractionally negative.  However, given the lack of exhaustion present at the lows, and commonly looked at momentum indicators like MACD just starting to turn negative, this still seems bearish technically and its right to see a revisiting of yesterdays lows and even a slight break next week before any lows are in.   Relatively speaking, Financials turned down throughout April vs broader market and was a key reason why it was right to expect possible Equity weakness into May.  For now, this group still has some work to do before it bottoms, and it's right to hold off on getting too aggressively long into this move just yet.  
 

Technology actually has given some encouraging signs of holding up quite well lately while the rally peaked out and has seen most sectors turn down sharply.  Relative charts of the S&P 500 Information Technology index vs SPX bottomed out right when S&P was starting to turn down in the last week, which is a sign that this pullback likely isn't yet going to turn into a crash as Tech remains the largest sector with 24+% weighting in SPX.  While Semiconductors have been noticeably weak and still look to move lower relatively, the broader Tech space has still trended higher vs SPX and might be a reason to consider buying into market weakness next week if/when prices get back down to Feb/April lows in the mid-2550's.  This still looks to be a sector to favor, and one should watch downtrend lines in ETFs like XLK carefully in the week ahead.   

Selloff not complete, and weakness possible into next week

May 3, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2623-5, 2611-3, 2600-2, 2552-3       Support
2666-8, 2675-7, 2681-2     Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/26/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Bearish-  S&P closed down at important hourly support near Tuesday'sintra-day lows, but structurally, momentum along with the broader trend, is getting worse.  a defensive stance is preferred, with breaks of 2623 resulting in an immediate test and break of 2611 on its way to the mid-2550's.   

SX5E- EuroSTOXX 50- Weakness possible to play catchup with US Prices have gotten above areas of resistance, and will need to undercut 3464 to think trends are turning down.  Given that US turned down after Europes close, i expect Europe likely backs off a bit and weakens, but has clearly been outperforming in the last month. 

HSCEI- Bearish-  Prices flipped right back after minor trendline break, so this casts some doubt as to the legitimacy of the breakout, given that it lasted just one day and has now reversed.  11855 key to hold, while over 12361 now needed to think trend is turning back higher.  

Trading Longs:  NEE, FE, ETFC, IBKR, TWLO, HQY, CAR, ENTA, 

Trading Shorts:  LL, C, WFC, USB, GILD, UTX, ITW, XLI, XLF, HOG, CBS, CMCSA, VIAB, LUV, SMH, AMAT, MCHP, NTAP, IBM, BBBY, EMN, PCAR, CLVS, MNK


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.
Long GLD
 under 123.75 , with expectations of a rally back to near 128.36 initially
Long DBC for commodity exposure- targeting $17.85
Long XLU with targets at 52.40
Short XLI with targets 70.25
Short XLF with targets
Short IYT 187.62 with targets at 181.50
Short SMH with targets adjusted downward to 92.50
Long EURUSD 1.1995 with expectations of a bounce back to 1.2150

Exiting TLT after yesterday formed a bearish reversal which could allow for a retest of lows before more upside


Stocks reversed following the minor bump post FOMC to close near the lows of the session, much to the dismay of investors which expected AAPL, or the FOMC meeting to give the market a bit of confidence.  As Bob Pisani on CNBC put it yesterday..  The Bulls have lost the narrative, and have to regain it quickly."   Unfortunately, there's no real narrative which aptly describes a cyclical downturn which cares not about earnings, nor Fed-Speak.   Given that earnings have never been a great predictor of stock prices, it's always wise to keep a close eye on the underlying trend and on momentum for evidence of divergences.  The concept switch of Good earnings becoming "peak earnings" will continue to be an issue, but doesn't have much explanatory power to the ebb and flow of stock prices on a day to day basis.  The trend, unfortunately for the bulls, has been negative since mid-March and also from late January as part of the larger consolidation.  With fear not at sufficient capitulatory levels to think lows are in, minor bounces have been met with selling pressure, which technically could lead to an upcoming test and potential minor break of February/April lows into next week.   For a bullish stance, we'll need to see some evidence of the NASDAQ and Technology in particular breaking out of its range and Financials following suit, which given yesterday's close, seems premature. 

Given the breakdown in Financials, Industrials, and more recently, Biotech and Semiconductor shares, its difficult to see what group should begin to lead, outside of a bounce in the defensive Utilities and/or REIT group if yields can hold on and not push immediately back to new highs.  Staples continue to be under severe pressure, and the US Dollar's surge has been relentless lately, though getting very stretched, while Euro and "Swissy" sentiment is turning quite bearish.   An oversold bounce looks to be around the corner for the US Dollar which should be a positive for commodities.  The key index for the equal-weighted Commodities space, the CCI index, has traded up to test very important area of multi-month consolidation resistance which should be exceeded in the months ahead.   For now, getting a meaningful pullback in the Dollar is likely pivotal for this trade to gain more traction.  



Additional charts and thoughts below.

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S&P failed to lift post FOMC, and the break of 2640 caused a fall to test Tuesdays' lows, which are thought to be quite pivotal to this entire structure, and more important at this point than 2611.  Breaks of 2623, structurally, have little support until the high 2500's, and this break likely should bring about sufficient fear to generate a trading low as markets near 5/7-9.  However, the larger trend is coming under tremendous pressure in losing momentum lately, as daily and weekly MACD remain negative, while the entire structure appears like a descending Triangle pattern.   This could prove problematic if 2500 were to be breached, bringing about a violation of the entire pattern since 2016.  This in turn would give rise to sufficient momentum deterioration to think the peak in late January in turn was the start of a larger rolling over in the entire uptrend from 2009, with any rally back to highs into Summer/Fall and/or end of year being one to sell into.  For now, this prediction is well premature, but the momentum loss is troublesome, and near-term, the patterns have been worsening with no apparent rhyme or reason with regards to fundamental or macro data.  
 

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The violation of April trendline support by the Financials is a negative development, and given the Fed's lack of a hawkish spin to help support this group, further technical weakness looks likely which should take XLF back down under $27 before any meaningful low is in.    Specifically, the pattern in the last couple days is very choppy and consolidation like after last week's break, a technical formation which supports the notion of this being a likely fourth-wave type pattern and should lead back to new lows.  Bottom line, buying into the Financial space looks premature, and it's best to avoid and/or short selective Technically poor names for a pullback in the days ahead.  
 

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The Gold miners got a much needed bid yesterday, as Gold rebounded from the consolidation lows near 1300 to turn higher at a time when the Dollar had become quite overbought.  This group looks likely to benefit further and rally in the days/weeks ahead given very bullish sentiment on the US Dollar/negative sentiment on Swiss Franc with DSI readings in single digits as of yesterday evening.  Technically the break of the downtrend from mid-April is a positive for this group, and any pullback in the US Dollar in the days/weeks ahead should spur a bid to the Metals and to Gold mining shares.  Technically this hourly chart shows the pattern of a developing Cup and Handle pattern which would be confirmed on a move back over 23.40.   Thus, buying the gold mining group here through GDX looks like an excellent risk/reward with stops at 22 and upside targets initially near 23.40 but over allowing for an outsized move to the upside.  

Snapback rally might still be premature to think lows are in

May 2, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2622-3, 2611, 2552-3       Support
2666-8, 2675-7, 2681-2     Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/26/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Bearish-  Late day rally should find resistance at 2665-70 before turning back lower with key areas for time change near 5/8-10.  At present, there are insufficient signs of a low in place for US stocks, and many sector ETFs like XLI and XLF maintain bearish posture and look to have more downside.   Use early rallies to sell Wednesday as over 2682 needed for any type of bullish stance and the odds favor a pullback over the next 7-10 trading days before any low is in for the US.  

SX5E- EuroSTOXX 50Bullish-  Prices have gotten above areas of resistance, and while nearing overbought levels, do not show counter-trend indications of exhaustion and Europe has been outpacing the US since mid-March with prices having held up and not declined despite the US having turned down.  While this has faltered a bit in the last few days, Europe might hold up a bit better over the next few days before turning down relatively again.  Movement to 3586 looks likely and above could allow for a brief test of 3659 which would represent a chance to sell. 

HSCEI- Bullish on the ability of prices to have exceeded highs since early April which effectively breaks out of the downtrend from late January.   This looks to lead higher, and at present, looks to outperform the US.  

Trading Longs:  GPN, NEE, FE, BKE, TWLO, GSK, HQY, CAR

Trading Shorts:  C, WFC, UTX, ITW, XLI, XLF, HOG, CBS, CMCSA, VIAB, LUV, SMH, AMAT, MCHP, NTAP, IBM, BBBY, EMN, PCAR, CLVS, MNK


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.
Long GLD
 under 123.75 , with expectations of a rally back to near 128.36 initially
Long DBC for commodity exposure- targeting $17.85
Long XLU with targets at 52.40
Short XLI with targets 70.25
Short XLF with targets
Short IYT 187.62 with targets at 181.50
Short SMH with targets adjusted downward to 92.50
Long EURUSD 1.1995 with expectations of a bounce back to 1.2150

Exiting TLT after yesterday formed a bearish reversal which could allow for a retest of lows before more upside


Stocks reversed off Tuesday's lows to close mildly positive, yet failed to accomplish much from a price or time target standpoint that would suggest meaningful lows are in place.  There were some indications of breadth yesterday at the lows showing better ratios (2/1 negative) than had been seen at higher levels earlier in the day (3/1) which was a partial positive signal that potentially a snapback rally could occur.  Yet, momentum gauges failed to signal any positive divergence on hourly charts and gains still haven't gotten above key areas which need to be exceeded to think any type of material low is in.   Movement above 2683 would be something to pay attention to, but for now, counter-trend rallies like what was seen Tuesday look to be temporary reversals designed to shake out shorts before the trend resumes.  Key times for trend change lie between 5/8-5/10 this month, and then 5/19-20, so it still appears likely that weakness can occur into mid-month, and no evidence of any real capitulation was present in volume or breadth to suggest any sort of a meaningful low.

Looking back, Industrials ETF, XLI broke down to the lowest levels of the year before snapping back to just barely regain early April lows.   Financials also fell to new multi-day lows when viewing XLF before bouncing, but both look to be in poor technical shape and trying just to "hang on for dear life".  Counter-trend signals of exhaustion are premature on both sectors, and yesterdays' snapback should be premature.   Technology meanwhile which had held up relatively well and outperformed yesterday, still is trending in a very tight consolidation pattern that doesn't yet appear like a chance to buy.  However, prices are nearing the apex of this wedge pattern and breaks of either side of this pattern likely will lead to follow-through and should be followed.   For now, the defensive sectors have more appeal in the next week. 


Additional charts and thoughts below.


S&P looks to have snapped back to right near attractive levels to sell per Tuesday's close.  As hourly S&P Futures charts show, the area at 2667-9 looks quite important and should represent an area to lighten up, hedge and/or seek out trading shorts on this bounce.  While Tuesday's late day reversal might seem encouraging on a one-day basis, momentum remains flat over the last couple weeks, while trends and momentum remain lower on weekly charts from mid-March and late January.   Cycles based on the decline from 1/26 into 2/9 suggest that 5/8-9 should be an important time for trend change, which very well could signal a low to this correction.  At present though, this is premature  The risk/reward favors using gains like yesterday's to favor the defensive sectors like Utilities and REITS in the short run, while avoiding Technology, Industrials, and Financials.  
 

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Industrials continues to look bearish technically and Tuesday's reversal to hold early April lows looks temporary, representing a selling opportunity for pullbacks down to near 70 over the next 7-10 trading days.   Counter-trend exhaustion does not yet look complete, while many stocks within the Aerospace and Defense group, along with GE, still look negative technically and appear premature in terms of bottoming.   One can avoid buying dips just yet in XLI, IYT, or ITA,  and relatively should expect that recent underperformance should continue in the short run over the next 1-2 weeks before any bottom.  
 

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Apple's post- earnings bounce in the after-market reached briefly over 174, but it's worth mentioning that we'll need to see a lot more  progress to think this stock has regained any real "mojo" as trends have slipped in relative terms vs QQQ and SPX since it peaked last November.   Weekly charts show the stock having gained ground to the highs of the uptrend channel near 180 and this area looks quite important to the stock as area where this should stall out and peak in performance.   Daily charts above show the area at 176-177 as having significance given the minor downtrend from March highs as part of the neutral range in the past five months.  So technically speaking, bounces into Wednesday's trading should represent a chance to sell into this spike, not think a move back to new highs is forthcoming.   As mentioned in prior reports, AAPL has consistently shown turns in the last few years near the 26-27 week mark, (which can be sent out to those interested in a separate report)  Bottom line, this sudden "About-Face" on Tuesday looks premature to mark any sort of meaningful low in the "FAANG" group, so rallies likely should turn out to be chances to sell for a pullback into more meaningful lows into mid-month. 

Monday looked important as a reversal day with Tech, Financials weakening

May 1, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2633, 2620-1, 2611, 2552-3       Support
2658-60, 2675-7, 2681-2            Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/18/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Bearish-  Monday should have started the decline to test and break early April lows, and it's right to use any Tuesday bounce to take profits and expect a move back lower down to 2611 initially.  Resistance should come in near 2658-60 to sell

SX5E- EuroSTOXX 50Bearish- Prices look likely to reverse course after having regained 61.8% of the prior downturn from late January.  3524 is important and over allows for gains to 3586.  Below 3450 suggests a pullback to 3424 which has importance.  

HSCEI- No change-  Choppy and Neutral short-term. following consolidation near lows for the last month- .  HSCEI requires a move back over 12450 to have a shot at a larger rally, which for now is subdued with prices locked in range-bound consolidation.  Downside under 11850 would bring about a selloff.   

Trading Longs:  NEE, FE, TWLO, CAR

Trading Shorts:  GM, HOG, STX, CBS, CMCSA, VIAB, AAL, LUV, SMH, AMAT, MCHP, NTAP, IBM, BBBY, EMN, PCAR, CLVS, MNK


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.  
Long TLT from 117.50-118.25, with TBT having reached targets,  expecting 10-Year Treasury yields to fall after the rise to 3%
Long DBC for commodity exposure- targeting $17.85
Short IYT 187.62 with targets at 181.50
Short SMH with target 93.88-94.25

GBPUSD_  Buy 1.3895 down to 1.38 for move back to 1.45

Stocks reversed sharply Monday, largely right on time with cycles that suggested a change of trend might be near.  Pullbacks under prior lows suggests that trends yet again are starting to turn negative and could result in a test and possible break of early April lows.   Groups like Semiconductors have begun to weaken substantially while a miss by Apple would likely give much more conviction to the idea that selloffs have begun.  Breadth worsened to 2/1 negative by the close, while Semiconductor stocks and Transports both weakened materially while Mid-caps also sold off sharply.  By the close, only Energy was positive and indices had sold off to under last Friday's lows.   Overall, price action seemed to fit within the framework of reversals happening into key cycles by end of month, and oversold bounces likely should be chances to lighten up for further weakness in the days ahead.  

Outside of equities, bonds rallied sharply with US Treasuries following suit on the rally from late last week while the Dollar furthered gains, getting closer to key resistance which should allow for a meaningful reversal in the next week.  Precious metals sank, though are very close to support which should allow for a sharp oversold rally.  The next few days should be key in this regard.  Overall, commodities should be close to trading lows, while the US Dollar is closing in on resistance and a push up into late Tuesday-Thursday should result in strong resistance and trend reversal for the Dollar.   Gold, meanwhile, has meaningful support at 1300-1310.


Additional charts and thoughts below.

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NASDAQ Composite looks to have begun its reversal to test and break early April lows with Monday's pullback under last Friday's lows.  Daily patterns from early in the year remain quite "Head and Shoulder-like" and movement under 6800 would prove to be a concern for the entire pattern from 2016 lows as well as longer-term uptrends from 2009 being complete.  Near-term, pullbacks from 7066 down to 6800 looks possible, and this area stands out as the real point of reckoining for this trend from January.  Minor Gains Tuesday and/or Wednesday would be used to take profits, as the larger pattern is getting worse by the day.  Movement back above 7350 is needed to postpone this decline.  
 

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Media remains one of the worst performing groups in the last three months, and additional downside looks likely in the weeks ahead.  While lagging substantially on a YTD basis, down over 10%, Media has fared even worse over the last few months, underperforming all other 23 groups which make up the S&P over the last three months.  Stocks like DISH, CHTR, CMCSA, CBS, DIS and VIAB are all down over 8% since the beginning of February, and technically speaking, more pain looks to be on the way.  Intermediate-term trends have been broken for S&P 500 Media index, and last week the group severed late 2017 lows.   Stocks like VIAB, CMCSA, CBS all still appear like attractive technical shorts and should be avoided technically.
 

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Autos were one of the weaker areas in yesterday's market, and a retest of March lows looks likely before any bottom.  This group made a good effort in breaking the downtrend from January earlier last month, but since has fallen on hard times yet again.  Both GM and F fell more than 2% in yesterday's trading, and despite positive performance for the month of April, both look to "back and fill" in the days and weeks ahead, with the S&P 500 Automobiles and Components index falling to test areas near 120.  Stocks like HOG, GM, F all look to weaken into mid-May and one should hold off on buying dips immediately, as all three look to move lower in the days ahead.  

Make or Break for Bears after S&P push up to 2677. Over postpones decline til May 1

April 27, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2650-2, 2636-7, 2620-1                 Support
2675-7, 2688, 2718-20, 2724-6     Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/18/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Bearish with a very short leash at 2677 for stops-  Prices rose right to near key resistance in both price and time, as indices have now seen 90 days pass since the late January highs and have risen to key trendline resistance from April 18th highs seven days ago.  The area at 2675-7 is important and one can sell Futures against this level.  Above stopping out shorts and postponing the decline until 5/1

SX5E- EuroSTOXX 50Bearish- Prices look likely to reverse course after having regained 61.8% of the prior downturn from late January.  3524 is important and over allows for gains to 3586.  Below 3450 suggests a pullback to 3424 which has importance.  

HSCEI- No change-  Choppy and Neutral short-term. following consolidation near lows for the last month- .  HSCEI requires a move back over 12450 to have a shot at a larger rally, which for now is subdued with prices locked in range-bound consolidation.  Downside under 11850 would bring about a selloff.   

Trading Longs:  ALL, EMN, NDAQ, M, TWLO, ABT, MOMO, CAR

Trading Shorts:  AAL, UAL, JBLU, LUV, TRIP, MCHP, SWKS, WDC, STX, , NTAP, IBM,  FDC, BEN, XRAY, DRQ, CMI, HSY, HOG, BBBY


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.  
Long TLT from 117.50-118.25, with TBT having reached targets,  expecting 10-Year Treasury yields to fall after the rise to 3%
Long DBC for commodity exposure- targeting $17.85
Short IYT 187.62 with targets at 181.50
Short SMH with target 93.88-94.25

GBPUSD_  Buy 1.3895 down to 1.38 for move back to 1.45

Amazon blows out earnings and is materially higher, yet Stock Futures are down Thursdayevening.  Sounds like par for the course for equity markets this year.  We've seen many FANG stocks and large cap Techs dominate performance, which represent outsized chunks of many ETFs  (Home Depot, Amazon, Netflix within Consumer Discretionary), yet the equal-weight version of these indices have faltered since late last year and/or have underperformed as the few large names have made up the bulk of gains.  

Thursday's rally carried prices to near make-or-break levels, and while getting over 2660 was important and a minor positive for the structure, prices have yet to break out above 2675, and now prices are nearing a key time zone for trend change, when this rally likely ends and reverts to the ongoing pattern in play, which in this case.. is lower.   We're faced with near-term overbought conditions on hourly charts, while weekly momentum is lower and structurally, indices have not made sufficient progress to argue for a move back to highs.   Breadth and volume have proven lackluster and we've seen material weakness and reversals out of Semis and Transports recently, along with many Industrial stocks, as Airlines followed suit on recent breakdowns and pulled back on Thursday.  Interest rates also look close to stalling out in the US, while many European bonds could fall to catch up with US.  The Dollar meanwhile has rallied sharply in the last 2 weeks, yet is nearing its own area of resistance based on the longer-term downtrend from December 2016, while counter-trend signals of exhaustion lie roughly 2-3 days away.  This should set up with chances to buy GBPUSD and EURUSD again, along with many commodities which have weakened of late, but remain technically sound on an intermediate-term basis.  

Overall, the next few days will be key to seeing whether Equities can make a bit more progress into end of month, or should fall right away and bottom out sometime next week.   The broader patterns at this point remain intact for equity indices, though the momentum decline is a concern, while leading sectors seem to be falling by the wayside.  A couple of strong days of movement higher which is not led by the leading groups and/or strongly positive breadth is a further concern given that trends from last week and the last few months remain negatively sloped.   The next few trading days into May should speak volumes about whether a larger pullback is imminent or can be pushed off until late Summer/Fall.  For now the degree to which we've yet to see the strong upward thrust in breadth and volume on rallies while Technology has been weakening, not strengthening, seems to be a concern.  


Additional charts and thoughts below.

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S&P- Bounce getting above 2660 was a minor positive but now is wrestling with 2675-7 while having pushed up into a key time for time change.  Technicals have not really improved all that dramatically on a short-term basis given this bounce over the last two days as part of the existing downtrend.  Yet shorts have a tight leash at 2677 and movement above would allow for gains into end of month before a May decline over the first 1-2 weeks.   For now, prices have pushed up to whats considered make-or-break territory.  The next couple days will be telling as to whether a reversal comes right away or whether prices can push up for another week before peaking.  Yet.. make no mistake.  the breadth has shown little to no upward thrust in 3/1 or 5/1 type gains which are broadbased which lends any trust to this bounce.   It's very likely something to sell into, yet again.  
 

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AAPL ahead of earnings is simply not attractive to own at current levels.  As weekly charts show the stock having stalled out after having hit the highs of this longer-term trend channel.  Momentum has weakened in the last six months as a result of this stalling out since last November and prices are roughly unchanged since late last year, having experienced little to none of the giant rally into late January.  With monthly charts showing prices having closed down at lows during four of the last five months, this looks unattractive at current levels.  One would look to buy weakness near 130 and sell gains to 180, tactically, but plenty of stocks look like better risk/reward situations than AAPL presently.

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Credit still in fine shape, it's Yields that have caused High Yield underperformance-  3.65% is key-  
Some are concerned that High yield seems to be underperforming SPX this year, and think that should lead to a period of "RISK-OFF"  While this could be true going forward, the fact remains that most of this underperformance in High Yield ETF's like JNK, or HYG is a result of interest rates having pushed higher, not true credit deterioration.   Charts of Spreads of high yield vs Treasuries show very little change if any in the amount of real Spread widening.  The Bloomberg Barclays US Corporate High Yield Average OAS spread lies near 340 basis points over Treasuries (based on the 5 yr yield), which is roughly in line with where we started the year.  So we'll need to see this climb materially before getting all that worried about Equities falling because of Junk concerns.   The one thing to note is that this daily chart has set up with a rather bullish pattern in the last six months, and this dip back down to recent lows, which represents a tightening in credit given the equity rally since April 2, has now begun to turn back higher.   Gains back over 3.65 in this spread would lead to upward acceleration given the current structure, and this is something to watch for to have real concern about credit deterioration that could metastasize to the equity market.  

Stocks up to level to sell, while Bonds offer compelling risk/reward as a LONG

April 26, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance

April 26, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/18/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Bearish-  The mild bounce back from early am lows failed to get above 2660, which would have made the picture more constructive, while both Technology and Financials were down on the day.  Not a great showing for stocks, but many convinced perhaps that the bottom is in, yet again.  At current levels, prices lie at good levels for selling rallies and expecting movement back down to recent lows.  

SX5E- EuroSTOXX 50Bearish- A decidedly bearish trend reversal which swept down to make new multi-day lows on an intra-day basis and opens the door to additional selling down to 3400-30.  Rally had reached 61.8% retracement level of the prior decline from January, which coincidentally hits right at the flattened 200-day moving average, while TD SELL SETUPS are now complete per Daily charts.   

HSCEI- No change-  Choppy and Neutral short-term. following consolidation near lows for the last month- .  HSCEI requires a move back over 12450 to have a shot at a larger rally, which for now is subdued with prices locked in range-bound consolidation.  Downside under 11850 would bring about a selloff.   

Trading Longs:  VXX, QID, DBC, SOXS, NDAQ, M, TWLO, CAR

Trading Shorts:  AAL, UAL, JBLU, LUV, MCHP, SWKS, WDC, STX, , NTAP, IBM,  FDC, BEN, XRAY, DRQ, CMI, HSY, HOG, BBBY


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.  
Long TLT from 117.50-118.25, with TBT having reached targets,  expecting 10-Year Treasury yields to fall after the rise to 3%
Long DBC for commodity exposure- targeting $17.85
Short SMH with target 93.88-94.25

Awaiting entry on GBPUSD- Looking to buy 1.3785-.90 in 3-4 trading days-  Had hit earlier target near 1.4370 and reversed sharply, so awaiting entry- No position

No real need for any type of change in view after Wednesday's trading and if anything, prices are closer to areas of upside resistance to sell into given yesterday's bounce.  Prices failed to break above key areas of resistance near 2660,  based on prior lows, and the downtrend from April 18th remains very much intact.  While many were impressed at the degree of snapback, it's important to reiterate that Technology and Financials both finished lower in trading..  Breadth finished negative for the day, and while Telecom and Energy led the rally, the only sectors up more than 0.50%, it's tough putting any real stock in these sectors as having importance in being able to lead the market materially higher.  Tech and Financials have both broken down of late, and these sectors represent over 40%. of the market, so it will be important for both to stabilize quickly to uphold any sort of bullish view. 

YIelds meanwhile closed up over 3%, but the longer-term trend, as shown below, shows channel highs of this resistance near 3.05%, not 3% and has been an ongoing downtrend in yields spanning back since the mid-90s.  Meanwhile the US Dollar index has bounced in the last week, but remains unattractive  overall given the trend from December 2016.  It's thought that this week's rally in TY Yields along with the US Dollar advance was somewhat constructive for Financials but yet detrimental to sectors like OIH, or Transports and of course, Gold. 

Additional charts and thoughts below.

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S&P- Bounce looks to be right near resistance to sell into-  After Wednesday's rally attempt, the S&P Trend remains bearish and Wednesdays bounce failed to alleviate any concerns about the trend having broken down.   The mild rally presents opportunities to sell into the bounce, expecting pullbacks to recent lows.  As stated, having Telecom and Energy lead while Technology and Finanicals finish negative isn't necessarily the biggest ringing endorsement that any kind of material low is in place.  Prices are now testing the area of the breakdown, and should create an attractive risk/reward opportunity to sell into this move
 

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SOYBEANS broke out to the highest monthly closing levels since June 2016 back in January, and this two month consolidation since that time looks nearly complete.  Negotiations look likely with China, as opposed to Tariffs, which had produced  some near-term overhang on the Grains.  However cycles which pinpointed lows back in 2006, 2011 likely bottomed also in 2015/6, and have just started to accelerate up as part of this cycle.   The break of the long-term trend should bode well for Soybeans to outperform as the commodity trade comes back into favor in the 2H of 2018.   Grains in particular, which had peaked in 2012 should outperform steadily.   Near-term, i expect rallies into late May/early June before the seasonal correction gets underway, but the longer-term prognosis from October into early next year remains very favorable for Beans, which once again should be poised to rise to the Teens.   

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US 10-Year Treasury yields have reached what is thought to be very critical resistance to this long-term downtrend which began in earnest back in the mid-$90's.   While many might think 10-YR TY yields getting over 3% represents a giant breakout for yields, this looks to be only the case psychologically.  Former yield highs lie near January 2014 near 3.05% intra-day and are thought to represent serous resistance to this yield rise which might stop this bond decline in its tracks.  In the next 3-5 days, i would consider yields to be up to very important areas of resistance, and bode well for taking a shot at buying TLT, and/or selling out of TBT, thinking that this yield move has nearly run its course.  Sentiment remains quite negative and should pose difficulty for yields to gain much further ground.   

Newton Technical Analysis- Rally holds near important overhead resistance

April 26, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance

April 26, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/18/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Bearish-  The mild bounce back from early am lows failed to get above 2660, which would have made the picture more constructive, while both Technology and Financials were down on the day.  Not a great showing for stocks, but many convinced perhaps that the bottom is in, yet again.  At current levels, prices lie at good levels for selling rallies and expecting movement back down to recent lows.  

SX5E- EuroSTOXX 50Bearish- A decidedly bearish trend reversal which swept down to make new multi-day lows on an intra-day basis and opens the door to additional selling down to 3400-30.  Rally had reached 61.8% retracement level of the prior decline from January, which coincidentally hits right at the flattened 200-day moving average, while TD SELL SETUPS are now complete per Daily charts.   

HSCEI- No change-  Choppy and Neutral short-term. following consolidation near lows for the last month- .  HSCEI requires a move back over 12450 to have a shot at a larger rally, which for now is subdued with prices locked in range-bound consolidation.  Downside under 11850 would bring about a selloff.   

Trading Longs:  VXX, QID, DBC, SOXS, NDAQ, M, TWLO, CAR

Trading Shorts:  AAL, UAL, JBLU, LUV, MCHP, SWKS, WDC, STX, , NTAP, IBM,  FDC, BEN, XRAY, DRQ, CMI, HSY, HOG, BBBY


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.  
Long TLT from 117.50-118.25, with TBT having reached targets,  expecting 10-Year Treasury yields to fall after the rise to 3%
Long DBC for commodity exposure- targeting $17.85
Short SMH with target 93.88-94.25

Awaiting entry on GBPUSD- Looking to buy 1.3785-.90 in 3-4 trading days-  Had hit earlier target near 1.4370 and reversed sharply, so awaiting entry- No position

No real need for any type of change in view after Wednesday's trading and if anything, prices are closer to areas of upside resistance to sell into given yesterday's bounce.  Prices failed to break above key areas of resistance near 2660,  based on prior lows, and the downtrend from April 18th remains very much intact.  While many were impressed at the degree of snapback, it's important to reiterate that Technology and Financials both finished lower in trading..  Breadth finished negative for the day, and while Telecom and Energy led the rally, the only sectors up more than 0.50%, it's tough putting any real stock in these sectors as having importance in being able to lead the market materially higher.  Tech and Financials have both broken down of late, and these sectors represent over 40%. of the market, so it will be important for both to stabilize quickly to uphold any sort of bullish view. 

YIelds meanwhile closed up over 3%, but the longer-term trend, as shown below, shows channel highs of this resistance near 3.05%, not 3% and has been an ongoing downtrend in yields spanning back since the mid-90s.  Meanwhile the US Dollar index has bounced in the last week, but remains unattractive  overall given the trend from December 2016.  It's thought that this week's rally in TY Yields along with the US Dollar advance was somewhat constructive for Financials but yet detrimental to sectors like OIH, or Transports and of course, Gold. 

Additional charts and thoughts below.

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S&P- Bounce looks to be right near resistance to sell into-  After Wednesday's rally attempt, the S&P Trend remains bearish and Wednesdays bounce failed to alleviate any concerns about the trend having broken down.   The mild rally presents opportunities to sell into the bounce, expecting pullbacks to recent lows.  As stated, having Telecom and Energy lead while Technology and Finanicals finish negative isn't necessarily the biggest ringing endorsement that any kind of material low is in place.  Prices are now testing the area of the breakdown, and should create an attractive risk/reward opportunity to sell into this move
 

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SOYBEANS broke out to the highest monthly closing levels since June 2016 back in January, and this two month consolidation since that time looks nearly complete.  Negotiations look likely with China, as opposed to Tariffs, which had produced  some near-term overhang on the Grains.  However cycles which pinpointed lows back in 2006, 2011 likely bottomed also in 2015/6, and have just started to accelerate up as part of this cycle.   The break of the long-term trend should bode well for Soybeans to outperform as the commodity trade comes back into favor in the 2H of 2018.   Grains in particular, which had peaked in 2012 should outperform steadily.   Near-term, i expect rallies into late May/early June before the seasonal correction gets underway, but the longer-term prognosis from October into early next year remains very favorable for Beans, which once again should be poised to rise to the Teens.   

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US 10-Year Treasury yields have reached what is thought to be very critical resistance to this long-term downtrend which began in earnest back in the mid-$90's.   While many might think 10-YR TY yields getting over 3% represents a giant breakout for yields, this looks to be only the case psychologically.  Former yield highs lie near January 2014 near 3.05% intra-day and are thought to represent serous resistance to this yield rise which might stop this bond decline in its tracks.  In the next 3-5 days, i would consider yields to be up to very important areas of resistance, and bode well for taking a shot at buying TLT, and/or selling out of TBT, thinking that this yield move has nearly run its course.  Sentiment remains quite negative and should pose difficulty for yields to gain much further ground.   

Tech, Industrials start to give way, as SPX gives back 50% of April rally

April 25, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/18/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Bearish-  The early rally failed and getting under 2657 turns the near-term trend down.  While it was thought to start the week that prices should fall this week, i had held out hope given  might hold up into 4/25, the market clearly had other plans and this drawdown in technology ended up metasticizing into other sectors.   Im expecting a test and break of 2600 and likely challenge of February/April lows into early May, if not sooner

SX5E- EuroSTOXX 50- Bearish-Trend reversal looks imminent for Europe which rallied into its 61.8% retracement level of the prior decline from January, which coincidentally hits right at the flattened 200-day moving average, while TD SELL SETUPS are now complete per Daily charts.   Pullbacks down to 3400-30 look likely initially. 

HSCEI- Still Neutral short-term after churning near the lows for the last month.  HSCEI requires a move back over 12450 to have a shot at a larger rally, which for now is subdued with prices locked in range-bound consolidation.  Downside under 11850 would bring about a selloff.   

Trading Longs:  VXX, QID, GLD, DBC, SOXS, NDAQ, DXC, TWLO, GDX, PGR, AOS

Trading Shorts:  MU, MCHP, SWKS, WDC, STX, SWKS, NTAP, IBM,  TUP, SAFM, FDC, BEN, XRAY, DRQ, CMI, HSY, HOG, LUV, SIG, FL, BBBY


TECHNICAL THOUGHTS


ACTION PLAN-  

Short SPY from 265, with targets down at 256.  
Long TLT from 117.50-118.25, with TBT having reached targets,  expecting 10-Year Treasury yields to fall after the rise to 3%
Long DBC for commodity exposure- targeting $17.85
Short SMH with target 93.88-94.25

Awaiting entry on GBPUSD- Looking to buy 1.3785-.90 in 3-4 trading days-  Had hit earlier target near 1.4370 and reversed sharply, so awaiting entry- No position

While it was thought that this week as a whole should be lower on a 3-5 day basis, the hourly divergences seemed to point towards strength on Tuesday.  Well that happened but proved incredibly brief and the reversal breached key support of the last few days which caused some extreme acceleration down into end of day before just a minor bounce.   S&P lost around 80 handles from 7 am until 2 before regaining 15, but trends are quite negative at this point on daily charts, and it looks wise to use any early strength to sell into, technically, expecting a test and possible break at this point of April lows.  

Semiconductors continued lower after breaking April lows, and the FANG weakness resulted in Technology breaking trends vs the SPX which likely will serve as a headwind in the short run.  While Financials were "less bad" and have been relatively holding up better given Treasury yields making a run on 3%, this group remains negatively sloped vs SPX relatively, and doesn't look ideal to pick lows in the Banks given a lack of real stabilization.  The other shoe to drop came out of Industrials Tuesday with stocks like MAS, MMM, PCAR, CAT, LMT, ALK, DE, PH all falling more than 5% in Tuesday's trading alone.  XLI has dropped down to test monthly lows which should be a real point of importance for Industrials over the next couple weeks.   The defensive sectors managed a decent bounce yesterday, as this stock market weakness helped to spur the trend towards safety, and Telecom stocks in particular managed some good relative strength, while Utilities and REITS also bounced, despite no real rally in Treasuries.  

The one change occurred with US Dollar reversing its recent strength on Tuesday, which resulted in precious metals rallying while Treasury yields look to be stalling out near 3% at a time when everyone unanimously is eyeing this as being psychologically important, and thinking that the rate rise is a key reason for equity weakness.   Technically we've seen evidence over the last week that warned of a possibility of a stalling out given weaker than expected breadth and momentum on this bounce, while Semiconductor and Financials weakness served as a definite catalyst, sector-wise.  


Additional charts and thoughts below.

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S&P-Trend has begun to accelerate lower, indicating that the highs for this particular cycle are likely in, and weakness into end of month/early May is likely.   Daily charts had already turned negative late last week on the initial weakness, so it looked to be just a matter of time before the entire trend started to weaken.  One should utilize any intra-day strength Wednesday to lighten up on longs, adopt hedges, or consider shorting for the tactically aggressive, expecting an upcoming test of April lows.  Given the bearish structure since late January, these might hold initially, but should give way to weakness down to near 2450 before any low of magnitude is in. 
 

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Technology looks to have broken down under the trend from mid-February, which could result in a serious headwind for Tech in the weeks ahead given its percentage weighting in the SPX of greater than 25%.    The longer-term trend remains very much in effect, but relative charts show this trend break as having a good chance of violating April lows in the days/weeks ahead.  

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Transports breakout attempt ends in failure- The Decline yesterday in Airlines and Rails was quite damaging to the TRAN, and we've seen prices now pullback into this range which had been ongoing from mid-February.  Resistance came in near the same levels that had been hit over the last couple months, just below 10850, and sets up  for a pullback down to 10k-10100 over the next 2-3 weeks.  Overall, this breakout failure does look important and negative in the short run, and it looks early to buy dips in the Trannies.   

Semiconductors , Airlines break down, but SPX manages to hold

April 24, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance


LINK TO TECHNICAL WEBINAR from last Thursday, 4/18/18- -https://stme.in/yadt92dtNf

 

SPX - (1-2 Days)- Mildly Bullish- While the trend for this week should be down, yesterday's late rally attempt kept the S&P from falling below where it needed to hold and we see some minor positive divergence.  Cyclically its possible to make the case for a peak on or around 4/25-7, which would involve a possible rally attempt Tuesday into Wednesday before any meaningful downturn.  At 2673, i can make the case for a rally to test and break 2683 and allow for some minor strength before the weight of the NASDAQ carries SPX lower.  Under 2657 means this is wrong and its right to bet on a move down to near 2600 initially.   

SX5E- EuroSTOXX 50- Europe looks to have reached resistance, with the combination of Monday's gains hitting the 200-day ma while Demark Sell setups were due to complete as of Tuesday's upcoming close above 3490.89.  One can look to underweight Europe by shorting the VGK, or EZU and expecting upcoming underperformance. 

HSCEI- Neutral short-term after churning near the lows for the last month.  HSCEI requires a move back over 12450 to have a shot at a larger rally, which for now is subdued with prices locked in range-bound consolidation.  


Trading Longs:  CIT, NDAQ, NOC, DXC, TWLO, XME, VEEV, SPLK, PGR, AOS, MPC, PLNT, DBC

Trading Shorts:  MU, MCHP, SWKS, WDC, PSA, REG, IBM, HOG, LUV, SIG, FL, BBBY


TECHNICAL THOUGHTS


ACTION PLAN-  

Looking to sell SPY at 270-1, or on evidence of this turning down under 265, which should cause pullback to 260
Long TLT from 117.50-118.25, with TBT having reached targets,  expecting 10-Year Treasury yields to fall after the rise to 3%
Long DBC for commodity exposure- targeting $17.85
Long ITA with target raised to 208-210
Short SMH with target 93.88-94.25

Awaiting entry on GBPUSD- Looking to buy 1.3785-.90 in 3-4 trading days-  Had hit earlier target near 1.4370 and reversed sharply, so awaiting entry- No position

The breakdown in SOX yesterday was a negative technically, violating April lows and closing near the lows of the session which looks likely to lead to additional weakness.  However, this didn't seem to affect markets as negatively as might be expected just yet.  Stocks had a chance to implode in the final hour of trading, but ended up rallying instead to finish the day just fractionally negative.  While NASDAQ did in fact begin to show more weakness, S&P held steady and relatively outperformed with some evidence of positive divergence on yesterday's dip while TD Combo buy signals were confirmed at the close on hourly charts. So S&P managed to hold above last Friday's lows, with Healthcare strength along with Consumer Discretionary, while Industrials just finished fractionally negative.   This suggests there still could be a rally attempt into Tuesday/Wednesday, and the close helps the trend from having turned bearish too quickly.   But make no mistake, as a leading sector, the SOX violating April lows is bearish for the market and likely could see SOX pullback to 1200 before any real low is in.

Overall, it remains right to avoid Semiconductors and this weakness likely will start to affect all of Technology which should be a concern for equities into May.   Airlines also broke down under key five-month trendline support and this area also appears like an area to avoid in the short run.  Meanwhile the Dollar's gains caused Emerging markets to underperform while Metals stocks suffered their second straight day of weakness.  Treasuries fell, as yields got closer to 3%, but still didn't match the global bond selling abroad as UK Gilts and German Bunds both saw yields rise at a much stronger rate.   It appears likely that Bund yields likely should close some of the gap to US Treasury yields in the days/weeks ahead.  

Bottom line, this looks to be a market of quite a few moving pieces and trends look to be slowly but surely turning down across the board for quite a few sectors.  While Semiconductors have taken the lead which likely will lead to eventual broad-based weakness across many sectors, for now, markets have a chance to squeak out 1-2 days of rally to peak out during the exact 90 day cycle from 1/26/18 highs.  While trends are negative now from January, March and look to have broken the uptrend from early April, it's tough to rule out a bounce attempt Tuesday, which is based largely on intra-day positive divergence, counter-trend hourly exhaustion, while cyclical peaks still looked premature for last week and have a better fit with Wednesday-Thursday of this week.  Pullbacks right back down under 2650 would postpone any thoughts of a bounce and the selloff should begin in earnest.  


Additional charts and thoughts below.


S&P-Trend turned more bearish late last week, but successfully held above Friday's lows in Monday's trading.   Prices attempted to stabilize yesterday in S&P Futures, failing to break down under last Friday's lows like what happened with the NDX and DJIA.  Signs of positive momentum divergence looked to occur during Monday's dip to test last week's lows while evidence of hourly counter-trend Exhaustion was present on the close which pointed to the chance of this trying to bounce.  Overall, S&P could attempt to rally in Tuesday//Wednesday as a result of these factors which would bring about a better cyclical high, but trends seem to have worsened based on last Thursday/Friday's decline so it's right to look to sell into this move. 
 

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SOX- PHLX Semiconductor index-  Yesterday's pullback broke the lows from April, which should bring about further weakness down to 1200 in the weeks ahead.   The larger pattern remains challenged given the deep retracements since last Fall, and yesterday's break violates the longer-term uptrend, which should soon lead to Semiconductors weakness leading the Technology sector to likely break the larger uptrend vs the SPX.   This could lead to Tech starting to weaken relatively, as FANG weakness of late combined with Semiconductor declines could bring about a larger period of Technology underperformance.

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Airlines break of support should lead to further underperformance-  Airlines (XAL) weakened below key support yesterday, with the pullback reaching the lowest area since mid-February, violating the entire uptrend from last November.   Given that this area was already tested once before, yesterday's break looks particularly negative and could allow this to serve as a meaningful drag for Transportation stocks.   Stocks like UAL, AAL, DAL, JBLU, LUV all could face further weakness into May. 

Semi decline troublesome, yet insufficient weakness to turn bearish just yet

April 20, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance


LINK TO TECHNICAL WEBINAR from yesterday, 4/18/18- Thursday 4/5- 

 

SPX - (2-3 Days)- Mildly Bullish- Yesterday seemed to be a "Shot across the Bow".. important in many ways. though still could lead to another retest of highs or slightly above into early next week before a turn lower.   Overall, i think upside is limited.  But difficult turning bearish just yet given incomplete Demark counts, cycles which point to next week and trendlines from early April that have not been broken.   Look to sell strength Friday and into Monday, while respecting breaches of 2660 as turning trends bearish.   Upside should be capped near 2748. 

SX5E- EuroSTOXX 50- Mildly bullish up to 3525-  Gains likely to prove minor into next week and right to underweight Europe vs US-  Minor strength for Europe, and getting above 3500 allows for fractional strength to 3575-3600.  For now, still expect this area is important and can hold.   

HSCEI- Make-or-Break after pullback-  Breakdown from trendline resistance keeps trend down and now a necessity to hold 11680, or else this results in a larger break which would violate uptrend from last May.  Important for immediate stabilization.   


Trading Longs:  NDAQ, NOC, TWLO, XME, VEEV, SPLK, PGR, AOS, WYNN, ROL, WIX, MPC, PLNT, DBC, FXB, TJX

Trading Shorts:  VNQ, PSA, REG, XLU, AZO, CLX, IBM, HOG, LUV, UUP, EUO, SIG, FL, BBBY


TECHNICAL THOUGHTS


ACTION PLAN-  Still looks right to be long commodity space and fade the US Dollar (Long Pound Sterling( while favoring strength in Aerospace/Defense and Transports while fading the interest rate sensitive areas like the REITS and Utilities.  Interest rates can rise a bit more, but the risk/reward is growing worse for Treasury shorts, and longs should be assumed if rates jump over 2.95%

Long SPY with initial targets 270, then 274.25-275
Long TBT, expecting 10-Year Treasury yields to rise to 2.95-3.00% and then stall
Long DBC for commodity exposure- $16.94 with targets $17.85
Long GBPUSD with target 1.4370, 1.50
Long IYT with target 195
Long ITA with target 205.50-206
Long XLK to 67.24 up to 68.20 this week

Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Short VNQ with expectations of a test of 72.65 and breach which could lead to 70-  Stop at 76.70
Short XLU with targets down at 47.88-48.25, Stop at 51


Yesterday seemed important and a "Shot across the Bow" in many ways as the market showed its hand, with distinct weakness in Semiconductor stocks, while Financials attempted to bounce while not making much of a dent in the ongoing underperformance this group has shown since February.   Given the possiblity of ongoing Semi and Financials underperformance, this would represent over 30% of the SPX and represent a true Headwind to gains in the upcoming weeks   Markets now are approaching trendline resistance from January highs, along with being an important 90 day anniversary of former highs, often an important time frame when projected from highs or lows in the past.  This period in April represented peaks in stocks two years ago along with lows in 2013, both important anniversaries that it pays to keep track of in any given year.

Interestingly enough, the 150 point S&P rally has not been strong enough to carry prices back to intra-day overbought levels, and breadth gauges remain below where they peaked in March, and remain negatively sloped since last October, which managed to turn in a higher high than this past January (Summation index)  Near-term, we've neared a crucial time where prices have neared trendline resistance from January highs, while counter-trend signals are close to forming on this bounce.    Given that the technical structure, along with weekly momentum remain negatively sloped from January, it looks right to sell into this move into early next week technically, taking a tactical approach to this upswing given the preponderance of negative technical factors.

Additional charts and thoughts below.

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S&P- Still tough to get too negative ahead of next week- Look to sell 2740-50-  S&P reversed sharply on Thursday, yet managed to rally slightly into the close to keep the uptrend from April intact.  Counter-trend sells remain premature, so given the lack of sufficient deterioration, it still looks possible for a "last gasp" rally to test Wednesday'shighs and get over this level, rallying to the 2740-50 area into next week. S&P is now approaching the 90 day cycle from January highs, and given that the 45 day worked well in providing the Mid-March highs, this looks to be an important time for S&P   Overall, insufficient weakness Thursday to suggest imminent trend reversal, but the action in Semiconductor stocks looks troublesome for the bullish scenario.  Given Thursday'spullback, any further rally back to highs should create short-term negative divergence and provide strong resistance near the uptrend from January.   On any pullback under 2660, there would be more conviction of a high in place.  
 

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SOX- PHLX Semiconductor index-  Yesterday's pullback proved quite negative for the Chip space, with price declines stripping away most of the rally from early April.   The trend has been neutral overall since last Fall, though the extent of the selloff is troublesome with regards to the broader pattern since last Fall.   SOX is increasingly resembling a large Head and Shoulders pattern over the last six months, and the area at 1250 has importance, and under that near 1200 which lines up to be the official "neckline" to this entire pattern.  Given its leading qualities, Semis can't afford to weaken too much more without casting doubt on the entire pattern as being anything other than a giant reversal pattern to the rally in recent years.  For now, still a bit premature, but the extent of the declines both into February and into early April have been lengthy and damaging.  

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Financials-  Bounce doesn't eliminate the degree to which this sector has lagged since mid-February.  This group has been under an increasing amount of pressure since violating the uptrend from last Fall.  Financials peaked a few weeks following the market top i late January, while contributing directly to the negative momentum from March highs.   Most of the Banks have struggled in the last few months, despite stellar earnings and have been a source of real confusion to the fundamentally oriented.  Overall, this group has lagged all but Consumer Staples in the last month of the major S&P sector groups, while also underperforming in the past week, despite yesterday's 1% gains.  This bounce shows how despite the strong gains yesterday, this trend remains very much negative.  For those seeking attractive stocks in Financials, the Exchanges and E-Brokers look to be some of the better areas of relative strength within the group, with stocks like NDAQ, CME, showing good strength, or others like AMTD, or IBKR.     

Energy and Metals strengthen further, while Financials, Semis lag

April 19, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance


LINK TO TECHNICAL WEBINAR from Thursday 4/5- https://stme.in/tBobOtxUYL

 

SPX - (2-3 Days)- Bullish- Upside likely is capped near 2748 next week, but for now, still looks early to pull the plug.  Further upside makes sense given the premature Demark counts on Daily and many intra-day charts, but one should be more selective about what to buy in the upcoming days.  The area starting at 2740-50 should serve as strong resistance at the 90 day, three month anniversary of January highs.  Near-term weakness on Thursday/Friday should be buyable for a final push up into early next week. 

SX5E- EuroSTOXX 50- Gains likely to prove minor into next week and right to underweight Europe vs US-  Minor strength for Europe, and getting above 3500 allows for fractional strength to 3575-3600.  For now, still expect this area is important and can hold.   

HSCEI- Make-or-Break after pullback-  Breakdown from trendline resistance keeps trend down and now a necessity to hold 11680, or else this results in a larger break which would violate uptrend from last May.  Important for immediate stabilization.   


Trading Longs:  URI, NOC, TWLO, XME, VEEV, SPLK, VRSK, WYNN, ROL, WIX, MPC, PLNT, DBC, FXB, NDAQ, TJX, STZ, BURL

Trading Shorts:  VNQ, XLU, AZO, EXPE, TSCO, HOG, LUV, UUP, EUO, SIG, FL, BBBY


TECHNICAL THOUGHTS


ACTION PLAN- No changes heading into Wednesday but on evidence of stalling out, might revisit

Long SPY with initial targets 270, then 274.25-275
Long DBC for commodity exposure- $16.94 with targets $17.85
Long GBPUSD with target 1.4370, 1.50
Long IYT with target 195
Long ITA with target 205.50-206
Long XLK to 67.24 up to 68.20 this week

Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Short VNQ with expectations of a test of 72.65 and breach which could lead to 70-  Stop at 76.70
Short XLU with targets down at 47.88-48.25, Stop at 51


Evidence of some splintering in the rally lately, as Financials and Semiconductor stocks were both negative in Wednesday's trading, and while prices still managed to close positive on the session, this kind of dropoff in participation from leading sectors is normally important to monitor after the last couple weeks of rally. Breadth has proven mildly positive in recent days, though lacking the upward thrust that would be necessary to see to have conviction of a larger move higher back to highs.  The 150 point S&P rally has not been strong enough to carry prices back to intra-day overbought levels, and breadth gauges remain below where they peaked in March, and remain negatively sloped since last October, which managed to turn in a higher high than this past January (Summation index)  Near-term, we've neared a crucial time where prices have neared trendline resistance from January highs, while counter-trend signals are close to forming on this bounce.    Given that the technical structure, along with weekly momentum remain negatively sloped from January, it looks right to sell into this move as of Friday/next Monday technically, taking a tactical approach to this upswing given the preponderance of negative technical factors.

Importantly, there are a few interesting and positive developments taking place in stocks despite Financials having lagged in recent weeks.   Energy has turned sharply higher, and followed suit to WTI Crude's continued strength.  Sector ETFs like XLE, OIH and XOP all look to still trend higher into early next week, and taking profits at current levels looks premature, technically.  Additionally, the metals trade looks to be close to starting on a more widespread basis, as Silver has gained ground on Gold lately (confidence in precious metals turning higher) while the Metals and Mining ETF (XME) has broken out of trendline support.  Given that unease remains par for the course in the Middle east right now, this very well could lead to some volatility in the upcoming couple weeks which might be blamed for causing weakness in equities, while at the same time, leading WTI Crude and Gold, Silver higher.  Overall, diversifying away from Financials and into the Metals and Energy space, (along with commodities as a whole) looks correct.  

Additional charts and thoughts below.

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OIH vs SPX-  Further strength likely to test January relative highs into next week.
Energy continues to gain ground in the short run, with yesterday's surge in WTI Crude back to new highs coinciding with XLE, OIH and XOP all showing above-average outperformance and extending higher to new weekly highs.   Relatively speaking,  the upturn in this group began back in February when it bottomed out, not unlike the extremes witnessed two years ago in February.  However, the acceleration has been most dramatic this past month with Energy showing dramatic outperformance.  Due to its weighting in SPX, this sector doesn't have much effect these days. But just in the last couple days, the push back above former highs after a TD Sell Setup was logged has helped this relative strength to continue.  Further outperformance looks likely in the short run, and XLE, OIH and XOP all look to offer above-average gains between now and next week before any short-term resistance.  Relatively, the OIH vs SPX chart is likely to test prior highs from mid-January which is the first meaningful area where this could stall out.  
 

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XME- SPDR S&P Metals and Mining ETF Breakout-   Metals and mining sector looks to be beginning a new period of acceleration after yesterday's gains successfully broke out above a key area of resistance that connected highs since mid-January.  While Gold has struggled in its attempts to breakout recently, Silver has begun to gain ground rapidly, while Aluminum has been showing stellar outperformance of late.  Technically, this area should be favored for outperformance again, as this consolidation from January looks to be giving way to strength yet again, (after strong performance last year) and should lead XME back to test and exceed January highs.  An upcoming decline in the US Dollar index should coincide with this strength, and could serve to help the commodity trade in general.  

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Silver gaining ground rapidly on Gold, eliminating divergence-  The ratio of Gold to Silver has started to drop off rapidly in the last couple weeks given Silvers outperformance, which had been sorely lacking in recent months.  Gold's attempts to breakout thus far have been thwarted, yet the metal remains in striking distance for a larger move higher.  Yet the strength in Silver is encouraging to think the precious metals trade can in fact work, as prior efforts showed the divergence between the two that made investors suspect, rightly so, that gains might not occur right away.  Bottom line,, the start of Silver turning up should help to gain conviction that the precious metals can begin to strengthen and in turn, the metals and mining stocks.   

S&P looks to have Upside to 2730-50 into end of week before Reversal

April 18, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2684-6, 2662-4, 2655-6, 2636-7, 2620-1    Support
2718-20, 2724-6, 2747-50                          Resistance


LINK TO TECHNICAL WEBINAR from Thursday 4/5- https://stme.in/tBobOtxUYL

 

SPX - (2-3 Days)- Bullish- S&P now getting closer to areas where a stallout is possible, after 7 of the last 10 UP days.  Until evidence of exhaustion and/or trend deterioration occurs, the trend remains bullish, and it's thought that 2740-50 is possible into 4/20, 4/23 before reversing lower.. 

SX5E- EuroSTOXX 50- Make-or-break for Europe on the upside-  Can't be broken - 3500 without expecting additional gains to near 3575-3600.  For now, still expect this area is important and can hold.   

HSCEI- Make-or-Break after pullback-  Breakdown from trendline resistance keeps trend down and now a necessity to hold 11680, or else this results in a larger break which would violate uptrend from last May.  Important for immediate stabilization.   

Trading Longs:  VEEV, SPLK, VRSK, WYNN, ROL, WIX, MPC, PLNT, DBC, FXB, NDAQ, TJX, STZ, BURL

Trading Shorts:  VNQ, XLU, AZO, EXPE, TSCO, HOG, LUV, UUP, EUO, SIG, FL, BBBY


TECHNICAL THOUGHTS


ACTION PLAN- No changes heading into Wednesday but on evidence of stalling out, might revisit

Long SPY with initial targets 270, then 274.25-275
Long DBC for commodity exposure- $16.94 with targets $17.85
Long GBPUSD with target 1.4370, 1.50
Long IYT with target 195
Long ITA with target 205.50-206
Long XLK to 67.24 up to 68.20 this week

Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Short VNQ with expectations of a test of 72.65 and breach which could lead to 70-  Stop at 76.70
Short XLU with targets down at 47.88-48.25, Stop at 51


Ongoing bullish uptrend and follow-through still ongoing, but still lackluster price action out of Financials which is a concern unless we can see some signs of Financials starting to catch up with Technology into end of week.  S&P is now nearing what i believe is important price and time based resistance to this move which could come about into the time from 4/20-28, and key area to focus on will lie just above current levels into Friday and/or the following Monday of next week at/near 2740-50, so its right to play for this area in price and/or time and look to sell into gains by end of week.  Trends are bullish, but getting overdone and we're now seeing intra-day charts growing closer to showing signs of Demark based exhaustion.  Daily charts however, which take precedence for the larger trends, remain bullish and early to fade given the lack of weakness

Technology has continued to show decent strength and the NASDAQ has broken out relatively vs SPX , so given the percentage of Tech representation in the SPX, should keep any downturn to a minimum for at least another 3-5 trading days.   Outside of the Tech space, the key area of focus lies with the Gold and Silver miners as Precious metals have begun to show better than average relative strength of late and the Middle East uncertainty coupled with weakness in the Dollar should bode well for gains into May in metals and Metals stocks.  Gold looks attractive for outperformance and Gold miners are an area to overweight heading into late April/May, thinking that this group should shine.  

Additional charts and thoughts below.

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S&P has now extended up to the first area of interest, near 2710, and intra-day charts are beginning to line up to suggest the possibility of this stalling out in the short run.  (However, most 60, 120, 180 and 240 minute charts along with daily still pinpoint 4/20-7 as producing a change in trend.   Movement that breaks this 3-day uptrend should hold 2660 if this rally is still intact, and then turn up further towards 2730-50.  For longs, the first area of downside support lies at 2684-5 and then below at 2662-4.  S&P cannot break 2660 without thinking a larger pullback could get underway.   For now, it's still right to be bullish going into Wednesday unless this trendline is violated, but one should use the first break as a chance to buy dips into end of week, as the larger area of price and time resistance still looks to be higher.    
 

NASDAQ Composite has now broken back up above important downtrend line resistance vs the SPX which is thought to be bullish for Biotech and Technology shares, and still looks to have upside in the days to come.  This bodes well for our thinking that Technology's bounce could help stocks hold up without much pressure into next week.   For now, any minor pullbacks should create opportunities to favor NASDAQ for outperformance into the end of April before any peak.  

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Gold and gold stocks should still be favored in the days/weeks ahead as they've been trading quite resiliently despite what's thought to be the end of the current Syria strike.   Given the recent downward pressure on the Dollar and Rates still churning over the last month, Gold and precious metals remain attractive and GDX is an ETF which offers attractive long exposure to the Gold miners group.  Further gains look likely in GDX, which should manage to exceed $24.25 in the next couple weeks.  One should consider positioning long in Gold mining shares.. and momentum, trend support this view.  

Transports, Aerospace/Defense both breaking out near-term

April 17, 2018

S&P JUNE FUTURES (SPm8)
Contact: info@newtonadvisor.com

2662-4, 2655-6, 2636-7, 2620-1,  2606-8, 2584-7     Support
2708-10, 2724-6, 2747-50                                          Resistance


LINK TO TECHNICAL WEBINAR from Thursday 4/5- https://stme.in/tBobOtxUYL

 

SPX - (2-3 Days)- Bullish- S&P finally managed to close up above the highs of the last three weeks, which should help prices gain more ground into end of week/early next before finding strong resistance, based on time and price.  Stay long S&P for a move to 2720-50 while being on alert for any failure which breaks the April trend and undercuts 2644 which would be a larger negative.  For now, more strength likely first

SX5E- EuroSTOXX 50Mildly Bearish as evidence of SX5E peaking out looks to be happening.  Upside should be limited to 3496 while any move under 3400 jumpstarts the decline back to 3250.   Prefer Europe short to US.   Fractional upside possible, but should underperform the US on this rise and face resistance at 3400-3500.    

HSCEI- Make-or-Break after pullback-  Breakdown from trendline resistance keeps trend down and now a necessity to hold 11680, or else this results in a larger break which would violate uptrend from last May.  Important for immediate stabilization.   

Trading Longs:  VRSK, WYNN, ROL, WIX, MPC, CAR, PLNT, DBC, FXB, NDAQ, TJX, STZ, BURL

Trading Shorts:  VNQ, XLU, AZO, EXPE, TSCO, HOG, LUV, UUP, EUO, SIG, FL, BBBY


TECHNICAL THOUGHTS


ACTION PLAN- 

Long SPY with initial targets 270, then 274.25-275
Long DBC for commodity exposure- $16.94 with targets $17.85
Long GBPUSD with target 1.4370, 1.50
Long IYT with target 195
Long ITA with target 205.50-206
Long XLK to 67.24 up to 68.20 this week

Long GLD 125-126 adding above 127 with targets initially 129.50, and stops 125
Short VNQ with expectations of a test of 72.65 and breach which could lead to 70-  Stop at 76.70
Short XLU with targets down at 47.88-48.25, Stop at 51


A decent follow-through price-wise in equities Monday after the Syria targeting proved quick and potentially complete, which was viewed by markets as a positive and not one which would lead to complications.  SPX managed to exceed the highs of the last three weeks which had served as resistance since late March.  Whether this indeed is "Mission Accomplished" or not remains to be seen, but the aftermath very well could prove volatile for Syria over the next couple months, and something the market might be overlooking.  Stocks and bond yields have been pressing higher, while the Dollar has turned down over the last few days.

For now, stock trends remain positive, though lackluster in the short run.  Volume remains muted as yesterday produced the lightest trading day of the year thus far and breadth has been abnormally flat for the bounce starting from early April.  While price action, momentum and breadth have turned up fractionally, we haven't seen the price thrust that would help to add conviction to this bounce.   After a 21 calendar day decline from 3/12/18, we've had 14 days higher, but yet have barely regained 50% of the prior move.  An additional push up seems likely given the rebound in Industrials and Technology, while the Banks performance remains something of concern.  For now, we'll emphasize the positive, as given a lack of price weakness and trend deterioration, there still seems to be upside in this move in the short run.

Two sub-sectors stood out in showing above-average strength in Monday's session that are worth noting:  Transportation stocks and Aerospace and Defense, both important parts of Industrials which managed to bounce  more than 1% in trading.  As charts below will show, both sub-sectors look to have made meaningful near-term signs of strength that can carry these groups higher, and should be overweighted this week.  


Additional charts and thoughts below.

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ITA, the Aerospace & Defense ETF, managed to close up above the highs from early April, reaching the highest levels since mid-March yesterday.  This occurred on strength from names like TDG, MOG, HRS, ATRO, LMT, RTN, NOC.  While this group has lagged since mid-February, yesterday's gains should help to fuel further acceleration in this group, and it's right to be long and add in the days ahead, expecting further near-term strength.   Names like BA, GD, NOC, UTX rose less than 1% yesterday and might be considered better risk/rewards to participate than the leaders like TXT, TDG, HRS and others.   Overall, given GE's recent woes within Industrials, this group looks to show some solid outperformance and could be favored within this Sector and overweighted near-term.
 

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DJ Transportation Avg has broken out of the downtrend which has kept this group largely lower since peaking in late January, not dissimilar from the broader market.  Yet yesterday's move gives some hope for the "Trannies" and should spark some outperformance, particularly in the Rail stocks, while the Airlines might underperform relatively speaking given recent turbulence.   Bottom line, this breakout yesterday has helped the Average to regain its 50% level of the decline from January while likely producing further strength which should help this reach 10800-900 in the short run.   A welcome boost to Industrials which had been suffering of late and Transports should be favored.  

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The Dollar looks to be turning back lower, as seen in the Bloomberg Dollar index which fell sufficiently to violate the lows of an ongoing consolidation pattern which had been ongoing since late February.  Given its lower percentage ratio vs the Euro than the DXY, this index should be trusted to help view a purer form of the Dollar in trading.   Sharp gains in Pound Sterling have taken place recently as the more hawkish BOE has diverged from the more dovish ECB lately.  But Euro also managed to turn higher yesterday in a fashion that should lead higher, and staying long Pound and Euro seems correct, while continuing to fade the Dollar.   Yesteday's stalling out in the Dollar vs Yen also was suggestive of the Yen starting to turn back higher vs USD, and bodes well for this weak Dollar thesis.