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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.   

unnamed-34.gif

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.