https://stme.in/tQjpfaAnK - LINK TO TECHNICAL WEBINAR from yesterday, Thursday 11/30/17
SPX - (2-3 Days)- Bullish Friday, but use strength to sell into and overall UPSIDE is LIMITED into and through next week- While the trend has certainly been quite positive in the last few days, with XLI, TRAN breaking out to new highs and XLF up to the highest since 2008, prices are too stretched and the combination of Demark sells with Technology deterioration is enough to adapt a defensive tone. Yet, intra-day Demark suggests a final push higher potentially into Friday's close given the non-completion of both 120 min and 240 min sells. For a bearish stance, one needs to see evidence of 2600 being broken at a minimum to expect selloffs down to 2550, which might be postponed until after December 3.
SX5E- EuroSTOXX 50- Mildly bullish, but Europe remains far weaker than US and has not even recouped 50% of the selloff from early November. Targets lie near 3636 while a move down under 3550 reasserts the bearish view. As stated, Europe remains far weaker than the US. In the bigger scheme of things, 3519 very important support for SX5E and can't be broken without expecting pullback down to test August lows near 3420.
HSCEI- Bullish- Prices are now down to right near 11400 and failed to follow suit on the US strength, but should attempt some type of rally now that prices are near former lows. Resistance lies at 11850, then 12111, which equates to a 61.8% retracement of the entire pullback since 2015. Under 11384 would stop out longs and be more bearish for further weakness.
Trading Longs: GLW, CNC, PFE, ALXN, RTN, MO, ECL, NOC, CAT, TWTR, V, ILMN, ITW
Trading Shorts: PCLN, CCL, EXPE, FOSL, NFLX, ALB, GE, TAP, HOG
ACTION PLAN- BUY HEALTHCARE.. SELL TECHNOLOGY, and TAKE SHORTTERM PROFITS in Industrials and Financials, looking to buy weakness on pullbacks
Upside should prove limited into next week given the extent of the rally in the last three days. Financials and Industrials in particular are likely to stall out early next week and given the recent Technology weakness (which was not really recouped), a short-term consolidation between these three groups represents nearly 50% of the market. While Healthcare and Discretionary are also important parts and have shown above average signs of participation in recent days, the market simply cannot keep moving at a pace where Bank stocks move 7-8% in three days' time. Technically speaking, i suspect that we're nearing a short-term peak, which should result in some minor consolidation in the first and potentially second week of December before a possible push into year end as part of a Santa Claus Rally.
Looking back, S&P NASDAQ and DJIA all up 0.80% or more, with DJIA leading all equity indices in its best percentage day gain of the year, breaking above 24,0000 with gains out of stocks like GS, UTX, UNH, INTC, BA all up more than 2%, while GE and DIS moved lower. Precious metals weakened while Treasury yields have broken out above the important 2.40% area. XLI broke out above October highs, and neared channel resistance,while the DJ Transportation also finished very extended, slightly above the upper channel drawn from previous highs.
The rally wasn't without its share of problems, and it's important not to ignore what's troubling about the market these days in attempt to be proactive about what could affect the movement over the next few weeks.
1) The breadth of yesterday's advance was just barely 3/2 positive.. not the 4/1 or 5/1 that might be expected during normal 1% index gains.
2) The Technology decline earlier this week remains a technical negative.. this has not been recouped, and gains into Friday/early next week should prove to be selling opportunities for Technology, and specifically the Semiconductors group
3) Equity Put/call ratios finished yet again at a low rate of 0.52.
4) Demark signals will show completed TD Sell Setups on Friday for SPX, DJIA from a very extended state
5) From a non-technical perspective, the fact remains that the Senate tax deal is still very uncertain and will involve real debate before this is passed. So if stocks are rallying hard on thinking the tax bill is a "shoo-in", the odds seem very close to 50/50, with any failure likely coinciding with stocks giving up recent gains.
The key concern is that industrials and Financials slow down after 6-7% moves in short order, while Technology could weaken further in early December. The combination of those would result in at least some consolidation. The market move is happening without any real fundamental or macro catalyst and largely still rotation but coupled with uncertainty on the horizon and doesn't present the best risk/reward heading into December for new longs, despite the seasonal strength- The one sector which looks appealing is Healthcare, having shown some signs of lifting in recent days and XBI along with DRG both show the potential to extend. so this should be the key area of concentration, as opposed to favoring XLI, XLF, or XLK
Additional charts and thoughts below.
S&P has gotten very stretched of late, with daily weekly and monthly RSI all showing readings of 75 or above, with both weekly and monthly RSI above 83. This parabolic move of 80 S&P handles in 10 days is set to trigger TD Sell setups today, (with nine consecutive daily closes above the close from four days prior) and normally results in at least some minor consolidation before the Santa rally. Given that investors are jumping aboard this rally by buying 2 calls for every put in speculating on further upside, it looks difficult to come by in the very short run, and one should look to concentrate on buying dips near trendline support at 2550 rather than chasing gains at 2645. Overall, some evidence of a new multi-day low would jump-start a minor pullback, and for now has not yet been seen this week, so this will be imperative before weighing in too negatively but many signs are starting to materialize yet again which aren't comforting from a non-price perspective.
Transports have gotten very stretched in leaping back over 10000 in the last couple days, and now challenging the upper border of this uptrend channel. Even in the most bullish of scenarios, the rally in Rails and Airlines should require consolidation after rallying nearly 1000 points in the DJ Transports just in the last few weeks alone. TD Sell setups will form Friday in the TRAN, and should allow for some backing and filing next week. One can consider selling into IYT for profit-taking Friday into Monday of next week.
The Healthcare rally looks back on track after consolidation throughout October and into November. This sector has rebounded sharply in recent days, with Pharma, Biotech and Medical Devices and Services stocks all participating. The combination of both intermediate-term charts along with improvements in near-term structure suggests that Heatlhcare could be a better risk/reward than reaching for Banks, or Technology at this juncture. Phamaceutical stocks like PFE, ABT, BMY, are particulalry attractive, technically speaking.