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

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

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


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

 

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

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

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

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

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


TECHNICAL THOUGHTS


ACTION PLAN-  

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


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

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

Additional charts and thoughts below.

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

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

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