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Happy New year- S&P Snapping back pre-mkt after declining 1.5% over last 5 days

Happy New Year !!

 

S&P has snapped back after declining about 1.5% in the final 5 days of the year.. and will need to make up some ground to expect it can be smooth sailing to start the year-  A sharp advance this am in Futures but the trend has turned bearish from late last year, despite the low volume so a bit more is needed to think indices are in the clear-  Key areas to watch start near 2262 up to 2268 on the upside to sell into this move- on the downside 2237 to 2240 important-   Seeing sharp declines this am in Treasuries  to coincide with S&P gains while the US Dollar also making very big move to the upside and at closing levels would constitute the highest daily close since late 2002 nearly 14 years ago-  CRUDE making a meaningful rise this am up to near 55, to multi-day highs.. and should be favored for further gains to the high 50s, despite the negative seasonality for January-  Last 5 Jans have been DOWN for WTI to the tune of about 2.82% on average.. but despite rising bullish sentiment. the structure remains solid for WTI and looks to extend in the near-term-  Overall,  a mixed picture to start the year given DOWN momentum but yet a sharply HIGHER opening gap to start the year, so a bit more necessary before believing new all-time highs can happen just yet-  

2017 YEARLY Technical outlook was sent out last night around 7pm, EST. so let me know if you DIDNT get and would like to.. or if you have any questions-  

 

5 min Technical video highlighting the 3 most important charts for today

https://stme.in/LDbz9fvO1

 

 

S&P HOURLY chart showing the price action since mid-December.  Overall the trend turned negative with a break down under 2256 and then 2251.. so despite being low volume.. this will need to be recouped to expect it was just a minor drawdown-  overall, upside in this case should find strong resistance at 2262 up to 2268 with only a move OVER making for a bullish case for rallies into mid-month.

 

 

Crude-  Daily-  Today’s move is quite constructive for Crude-   Long positions favored. With targets up in the high 50s-   CL, USO.. OIL.  Crude ETFs and Energy likely outperform.  OIH, XOP.. XLE

 

US Dollar set to make highest DAILY Close based on today’s move since late Dec 2002 nearly 14 years ago.  While counter-trend sells are close.  Structurally this should still move to new highs.. and is BULLISH USD.. bearish EUR/USD

 

Happy Holidays- 5 min Technical Video and Brief Comments

5 Min Technical Video covering

https://stme.in/t12Zcp6gG

 

Minor gains in Equity futures this am while most of Europe is also positive with STOXX 600 set to potentially record its best monthly gains in more than a year-, UK market closed today and lower volume throughout as might be expected.  US Dollar along with WTI Crude extending gains again while Gold also bouncing-  US Treasury yields showing a bit of resilience and Italian and portuguese bond yields climbing while German and Swiss yields lower. German bund yields this am back down under .20 bps-  Consumer confidence and Richmond Fed Manuf index due later this am.  For Traders.. Important to see S&P climb back over 2272 which would result in acceleration back to new highs with targets up near 2290-2300 into year-end-   2251 important as support, and until breached, pullbacks would be used to buy against this level-  Premkt gainers this am: IONS, CNAT, BIOS, GOGL, ONVO, CEMP, RGLD, while on downside-  ELGX, INAP, and AMPH-   Overall, a bullish stance is proper during this final 4 days of the year and greater than avg chance for stocks to push higher with continued resilience in DXY, TNX and S&P futures--  Let me know if you have any questions.. and Happy Holidays to all

 

 

S&P-  HOURLY-  Consolidation should give way to upside-  2265-6 initially imptthen 2272

 

 

 

 

 

 

 

S&P-Daily

 

 

 

 

Happy Holidays- Consolidation paves the way for a splintered rally into Year-end

December 23, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2251-2, 2242-3, 2232-4, 2222-3        Support
2264-5, 2271-2, 2279, 2286-8            Resistance

 

 


S&P Futures: (2-3 Days)  Bullish- Weakness still hasn't proven outsized in nature to break below key support at 2242.  With markets only having five more trading days left in the month and year, trends still argue for upside into 2272 area, with over leading to 2285-95.   On the downside, 2242 is support.

SX5E- EuroSTOXX 50-  Bullish- Movement up to test 3307-3316 looks likely into year-end.  Until/unless 3209 is breached, it looks likely that prices can still move higher and test this important peak from nearly exactly one year ago.

HSCEI-  Bearish-  Break of Nov lows along with intermediate-term trendline is not constructive for HSCEI, which was thought to likely have a chance at stabilizing here and trying to bounce.  Additional weakness looks possible to 9000. 


Longs/Shorts for a 3-5 day period:

Technical Longs:  BOIL, KRE, TBT, QQQ, OIH, AKAM, NTAP, CTXS, ADI
Technical Shorts:  EEM, HALO, FPRX, TDC, GPN, AET, HUM, XRX, CRM, YHOO, AWI, FOSL



TECHNICAL THOUGHTS


Thursday's move to new multi-day lows failed to cause any real technical damage as indices reversed losses to close nearly unchanged by the close.  While Small-caps lagged along with Emerging markets, technical damage in US indices was insufficient to argue for a larger breakdown of any sort.  With five more full trading days left in the month, it still looks likely that indices can push back higher to move to new high territory into year end before any larger stallout occurs. 

Sector-wise, Financials and Semiconductor stocks continue to show good signs of strength, along with Energy, while Healthcare and Retail stocks were outsized laggards, both breaking down to multi-day lows which might cause further near-term weakness.   Tech still looks to be an area to favor in the days ahead, as the SOX has another 3-4 days of upside before this stalls out, likely into end of year.

The US Dollar index and Treasury yields, similar to Equities, showed very little net movement on the day, and remain largely range-bound over the last 6-9 trading days.  Given the consolidation within the ongoing uptrends, movement back to new highs looks likely before any pullback, so it still looks right to be long USDJPY, SPX, QQQ, while short Treasuries, expecting a possible rise to 2.70-5%.

 


S&P futures hourly charts detail the ongoing consolidation that has gripped US Equities since mid-month, with nearly nine days of no net change in price following almost a 10% rise from early November.  This consolidation has helped to alleviate overbought conditions, yet has still not shown sufficient deterioration to think a pullback is imminent.  Given that markets have five full trading days left in the year, bullish seasonality tendencies would suggest a move back higher is likely than any meaningful pullback.   Thursday's attempted weakness which threatened to take indices down to weekly lows turned out to be nearly a non-event by the close, as prices regained nearly all of the early losses.  Bottom line, the trading range from early December remains intact until/unless 2242 is broken.  For Friday's trading ahead of the long holiday weekend, movement back up to test and breakout above 2272 looks more likely than a break of 2242. 

 

 


Following up on yesterday's thoughts, Biotech's pullback extended below key support in Thursday's trading, violating $60 and making further near-term weakness likely.  XBI, as shown in the daily chart above, cracked below prior lows from November, making a decline down to $57.50-$58 possible in the final five trading days of the year.  Thursday's weakness in stocks like EXEL, LXRX, ATRA, KITE, FPRX, HALO, and BPMC ended up stripping more than 5% off in trading, with most looking to extend near-term declines into next week.  Overall, while this group should soon hit support that would justify buying dips, for now it remains quite premature, and continues to be the weakest part of Healthcare.  Extreme selectivity is required when buying in the next week..

 

 


Retail was another one of Thursday's big underperformers, down nearly -3.50% Thursday as per XRT. Daily charts show the breakdown of prior highs that had been exceeded in November, as one of the years' most bullish months for Retailing gave way to weakness as December got underway.   This trend isn't necessarily new, and election results couldn't be attributed to the success of many of these stocks, as the sector yet again seems to be following the seasonal playbook.  Stocks like ZUMZ, DKS, BIG, DDS were all down more than 7%., coinciding with XRT cracking below a key area near 46.50 that had held since the Spring.  The breakout of this level two weeks ago lasted only one week before immediately pulling back below.  Given Thursday's decline back below $45, additional near-term weakness looks likely for XRT, and this sector should be avoided in the final five trading days of the year. 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Healthcare shows signs of weakness as minor SPX pullback occurs

December 22, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2253-4, 2242-3, 2232-4, 2222-3     Support
2271-2, 2279, 2286-8               Resistance

 


S&P Futures: (2-3 Days)  Bullish- Pullbacks have reached lows of hourly symmetrical triangle support.  Movement up above 2264 should help S&P push higher to test 2279 and above.   On the downside, 2242 is support, and under would bring about a 2-3 day pullback.

SX5E- EuroSTOXX 50-  Bullish- Movement up to test late December 2015 highs near 3316 look likely into year-end.  Until/unless 3209 is breached, it looks likely that prices can still move higher and test this important peak from nearly exactly one year ago.

HSCEI-  Neutral- Good to have stabilized a bit in the last day, but more is needed to have proof of a real low.  For now, still no real evidence yet of an immediate bounce. 


Longs/Shorts for a 3-5 day period:

Technical Longs:  BOIL, KRE, TBT, QQQ, OIH, NVDA, AKAM, NTAP, CTXS, ADI
Technical Shorts:  TDC, GPN, WYNN, AET, HUM, XRX, CRM, YHOO, AWI, DDD, FOSL



TECHNICAL THOUGHTS


Equities have begun to take on a bigger sideways pattern in the last few days as part of this uptrend from November, along with similar price action in both the US Dollar index and US Treasury yields.  All three moved up in unison from June lows in the summer, consolidated before making sharp advances in early November up until early December.  This recent 5-day grinding action doesn't necessarily imply "TOPS" for each of these, but it will be important to watch how they each move as they've had a history this year of moving in tandem.   For now, any near-term selloff in the next 1-2 days should be a buying opportunity for US equities and the US Dollar, while a chance to sell Treasuries for a move up to 2.70-5%.

One interesting point regarding the bond market of late is how persistently weak the US Market has been relative to the rest of the world.  US Treasury yields have barely experienced any of the recent pullback seen in German Bund yields.  While this ratio looks to be getting stretched per Demark indicators in a way that could lead to some mean reversion early next year, for now, its proper to still own German Bunds while selling Treasuries.

Demark wise, there have been a plethora of signals that have arrived in recent days on daily charts of most of the US Benchmark indices, along with the US Dollar index and even ones for TNX itself amidst US Fixed income.  For now, it remains difficult to put lots of trust into daily exhaustion signals, when the weekly charts for most of these instruments still suggest that additional upside is needed to complete larger weekly 9-13-9 patterns, and/or some have TD COMBO signals that remain just 1-2 weeks away.  Often when daily signals are present, but yet weekly remain close but not triggered, it remains right to hold off on getting too aggressive in trying to fade the daily exhaustion, and much more precise to hold off until daily and weekly are in alignment.  Such a setup would occur on further strength into end of year.  This reason alone makes it likely that any holiday selloff attempt proves short-lived, allowing for rallies back to new highs into end of year.

One sector which is certainly not immune to any selling is Healthcare, which just moved back to new multi-day lows on daily charts (XLV) as Biotech continues to struggle in bottoming out.  For now, the drawdown in this group should prove short-lived, but yet could still continue another 2-3 days.  Therefore its prudent to await signs of XBI strengthening before getting too aggressive in buying dips.  Both Pharmaceutical stocks and Medical Devices had made more recent progress in breaking back above one-month downtrends than Biotech, which remains stalled out.


 


S&P futures hourly charts failed to follow through Wednesday, but the extent of the pullback failed to do much technical damage.  As the chart shows above, prices now lie near the lows of this symmetrical triangle pattern and should muster a bounce in the days ahead to breakout above 2272.  Only in the event that 2242 is breached would this be in jeopardy.  For now, ahead of the holidays, pullbacks like Wednesday's should turn out to be excellent buying opportunities.

 


With the start of Winter for the Northern Hemisphere brought about decent price improvement for Natural Gas on Wednesday, as prices managed to close above key downtrend line resistance ahead of Thursday's EIA numbers, which reflect a Survey guess of -204.13 bcfDrawdowns. This move looks to extend up to test and take out prior highs near 3.77 from early December with initial targets up near 4.25.  Stocks like SWN which are heavily tied to Natural gas could benefit from such a move, and should be favored near-term for outperformance.

 

 

Healthcare as a group remains vulnerable when seeing prices move back to new multi-day lows and additional weakness seems likely to near 67.50-68 before any legitimate bottom is in place.  For now, Biotech has struggled to keep pace with the Pharma and Medical Devices move, and XBI will need to stabilize and turn back higher in a way that allows this group to breakout above its existing downtrend before thinking this sub-group can outperform.  For the near-term, additional weakness looks likely into year-end.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

DJIA closing in on another historic landmark- 20k- What lies next

December 21, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2253-4, 2242-3, 2232-4, 2222-3     Support
2279, 2286-8, 2295-2300                Resistance

 


S&P Futures: (2-3 Days)  Bullish- NO CHANGE-  Movement up above 2264 should help S&P push higher to test 2279 and above.   On the downside, 2242 is support, and under would bring about a 2-3 day pullback.

SX5E- EuroSTOXX 50-  Bullish- NO CHANGE- Prices still look to move a bit higher after the 50% retracement of the 4/2015-2/2016 decline didn't produce any real resistance other than a minor stall out.  Until/unless 3209 is breached, it looks likely that prices can still move higher.

HSCEI-  Neutral-  Prices have reached prior lows, but still no real evidence yet of an immediate bounce.  We'll need to see some signs of stabilization in the days ahead.



Longs/Shorts for a 3-5 day period:

Technical Longs:  KRE, TBT, QQQ, NTAP, CTXS, ADI, UUP, EUO
Technical Shorts:  WYNN, AET, HUM, XRX, CRM, YHOO, AWI, VFC, KODK, DDD, FOSL



TECHNICAL THOUGHTS


As we move into the Winter solstice, or the shortest day of the year for North America, equities continue to show signs of resilience.  With just seven full trading days left in the year, most US indices are back at new all-time highs, while the DJIA closes in on another historic landmark, Dow 20,000.  Given that it took less than two months to rise more than 2,000 points, without even stopping for a breath at 19,000, this move has certainly come about very quickly, defying expectations and emboldening those who are long stocks.  For now, additional upside still looks likely over these final days, but is growing increasingly stretched, and up to targets where much further upside should prove difficult into the new year.   The Combination of overbought conditions, counter-trend sells per Demark, and bullish sentiment are all likely to take a toll on stocks in the month of January.   For now though, yesterday's move above 2264 likely spurs on further strength given that DJIA and NASDAQ are back at new all-time highs while the SPX is within 2 points.

When considering Dow 20k, as we all know, it's much more psychological than important technically speaking.  It took just three years to go from DJIA 15k to DJIA 20k, yet 14 years to go from DJIA 10k to 15k.  In that same token,  DJIA 1000 was nearly hit back in 1966, but wasn't officially surpassed on a daily close until 1972, but just briefly before the horrific 1973-74 bear market took hold.  It was not until 1982 that this historic 1,000 landmark was surpassed for good.   The mentioning of these levels, however, DOES play a critical role in giving conviction to those that are long, while nudging others to join the party, at often the exact wrong time.  Sentiment tends to grow around round numbers, which is largely Media-driven.  Finally, with regards to the DJIA, it IS significant to keep track of this price-weighted index, despite stocks like GS carrying the heavy load for the DJIA of late.  DJIA tends to correlate very positively with SPX and the divergences created by confirmation, or lack thereof tend to be important.   Given my thoughts of stocks potentially peaking out at end of year, technically, I think it's more likely that 19k is revisited before 21k is hit.

Outside of equities, the US Dollar index and Treasuries are two of the more important assets to keep a close eye on, as Dollar/Yen is showing signs of getting stretched along with Treasury yields at the same time as Equities.  Counter-trend sells are close to appearing on both of these, and it could well be that given that all rose in unison, a similar drawdown should also happen simultaneously, as the pullback in yields in the weeks ahead is likely to have a damaging effect on Financials.  For now though, it looks premature to call "FIRE" in the theater ahead of the holidays, and it looks likely that we probably can push a little higher, helping sentiment to widen out even more into 2017.


 


S&P futures hourly charts show the progress that was made on Tuesday, with prices pushing back up to within striking distance of new highs yet again.  This takes the shape of an ascending triangle pattern, and should allow for brief new highs, as technically it's seen as much more constructive, then Bearish.  The pullback attempt last week , after breaking this minor uptrend, really gained no traction whatsoever, and simply grinded sideways for the last week before pushing higher Tuesday.  For now, the path of least resistance still looks to be higher.

 


DJIA lies just 25 points away from 20k, a level that's sure to be hit in the next three trading days, today included.  For now, Tuesday's push back to new high territory argues for a bit more upside into end of year, with targets near 20115, but is unlikely to continue upwards uninterrupted given the combination of upcoming counter-trend confluence between daily and weekly charts while Weekly momentum gauges like RSI have reached the highest levels in three years.   For now, technically, we're overbought, but quite stretched and closing in rapidly on near-term targets.

 

 

Gold has nearly retraced the entire advance from this time last year, when it bottomed out at nearly an exact one-year anniversary to today.  The last few Decembers have proven sub-par for Gold, and this one is no different.  At present, we look to be "close" but still not there in regards to reaching downside targets, and Gold looks to have another 2-3 weeks of potential downside which could in fact make a complete retest of last year's lows.  For now, counter-trend traders should be alert to try to buy dips on any move to 1100 or below as this should be close to some type of tradable low into year end.  However, the intermediate-term trend remains quite negative, as Gold has lost its uptrend and now getting back down into the prior range.  Given the ongoing rally in the US Dollar which looks to continue into next year, further downside might very well be in store for precious metals in 2017.  Key stops for any trading longs at 1100 or below lies near last December's lows at 1050.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Technology strength important as sideways consolidation continues

December 20, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2242-3, 2232-4, 2222-3        Support
2272-5, 2279, 2286-8           Resistance


S&P Futures: (2-3 Days)  Bullish- Consolidation still hasn't resulted in any pullback and seasonal bullishness should help carry equities higher into end of year, as the NASDAQ is starting to act much better and should help to lead the broader market.   Near-term, 2264 should have importance and over can help prices get to 2278-9.  On the downside, 2242 is support, and under would bring about a 2-3 day pullback.

SX5E- EuroSTOXX 50-  Bullish- Prices still look to move a bit higher after the 50% retracement of the 4/2015-2/2016 decline didn't produce any real resistance other than a minor stall out.  Until/unless 3209 is breached, it looks likely that prices can still move higher.

HSCEI-  Bearish- Ongoing weakness doesn't yet seem complete, with a move down to 9150-9250 being likely in the days ahead which would represent more formidable support.   Movement back up over 9624 is necessary to argue a bullish stance.  


Longs/Shorts for a 3-5 day period:

Technical Longs:  NTAP, CTXS, ADI, UUP, EUO, QQQ, GILD, AMGN, AAPL
Technical Shorts:  WYNN, AET, HUM, XRX, CRM, YHOO, AWI, VFC, KODK, DDD, FOSL, TRIP, TUP



TECHNICAL THOUGHTS


It's looking increasingly likely that prices will resolve this consolidation by pushing higher into end of year before any real setback occurs.  Despite the bullish sentiment readings, waning breadth, counter-trend signs of Exhaustion per Demark, we just haven't seen much, if any signs of real weakness.   Prices remain largely where they were six days ago, and the pickup in Technology could serve to bolster the indices during this seasonally bullish time.   The key in the near-term will be the breakout above recent highs for SPX, and NDX looks to have begun to turn up yesterday.  If Technology can begin a strong bounce into year-end, the market likely should be given a healthy tailwind, in a similar fashion that Financials helped the indices during the latter half of November.  For now, despite some momentum waning, it's just too tough betting against indices when prices remain within striking distance of highs, with little or no counter-trend signals on the NDX, nor SPX on weekly charts (both which require higher prices into end of year)

Looking back, Monday brought about a mild decline in Dollar/Yen, something which should be watched carefully given the positive correlation with SPX over the years.  Bond prices showed some evidence of stabilizing and turning higher, at least in Europe, while both Crude and Gold managed small bounces. 

The Technology move should be an area of real focus since this sector has lagged until the recent strength last week on the NDX breakout, and given that Tech accounts for 20% of the SPX, this should be something that has the potential to carry the entire market up into year-end.   For now the key will be for NDX to climb back over 4960 on a close, and for NASDAQ Composite to exceed 5487.  Both indices show daily signs of upside exhaustion, though neither indicator is flashing red on a weekly basis. This should be a green light for thinking we could move higher unless the lows of this recent consolidation are broken, which for now, looks premature.

Sector-wise, Casino stocks showed some evidence of turning down again, following their recent deterioration, and Healthcare showed some evidence of slowing after key resistance held Biotech from breaking out while Pharma (DRG) also ran into a serious level that could be of importance.  For now, Healthcare has made good progress in recent days, but might require some backing and filling of its own before moving too much higher, and/or will need to see progress out of Biotech and Pharma above key areas of trendline resistance.


NDX's +0.50% gains on Monday outperformed SPX and should be well positioned to push higher in the days ahead, which should allow for equity markets to begin a final push up into end of year.  QQQ, XLK and MSH have all shown recent progress and Technology's outperformance on Monday should help to jumpstart this sector and result in positive gains for the days ahead.   While not expected, movement back under the lows of this consolidation would postpone the rally, but even in this case, declines should prove minimal and buying opportunities.


Biotech's ETF, the XBI, has now stalled for its second straight trading session near $62.50-63 which looks to be important on daily charts.  Biotech never quite got the bounce that Pharma and Medical Device stocks enjoyed in the last few weeks and until this area can be exceeded, this group remains under pressure.  Stocks like REGN, ALXN were key laggards on Monday.  Pullbacks to near $60 look likely and a Gap-fill near $58.56 can't be ruled out before this stabilizes and turns higher (which is expected after this minor pullback runs its course)

 

 

Copper has shown increasing signs of turning down vs Gold in ratio form, and after the recent technical damage affecting Iron Ore and Steel Rebar over the last couple weeks, Copper has begun to turn down more sharply in recent days.  Gold meanwhile has stabilized , and while bearish, it looks likely that Copper underperforms in the short run and moves down at a faster rate.  For now, Copper should be avoided for the next 1-2 weeks while this correction runs its course.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Dollar surge with Yield curve flattening leads to Financials strength, but little else

December 16, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2245-6, 2240, 2232-4, 2220   Support
2272-5, 2286-8                       Resistance

 


S&P Futures: (2-3 Days)  No Change- Bearish-Until highs are exceeded on a close, it's still likely that post expiration could bring Lower prices in the very short run (2-3 days) and the price action could be bearish for a move down to 2232, with gains back over 2271 needed to think the worst is over and a rally to 2300 could happen into end of year. Over 2271 it's right to stick with the uptrend.

SX5E- EuroSTOXX 50-  Bearish- Pullback to 3100-50 likely in the next few days before rallies take hold.  Counter-trend sells are present which are also seen in SPX right now which could be confirmed and allow for minor backing and filling before a year-end rally.  For now, doubtful we see anything below 3050, with above 3300 being a stop for shorts.

HSCEI-  Bearish- Pullback down to Nov lows looks likely- 9250-69 area, which should then lead to stabilization and support before rallies take hold.


Longs/Shorts for a 3-5 day period:

Technical Longs:  NTAP, CTXS, ADI, UUP, EUO, QQQ, GILD, HUM, AMGN, AAPL
Technical Shorts:  XRX, CRM, YHOO, ANF, AWI, VFC, KODK, DDD, FOSL, TRIP, TUP



TECHNICAL THOUGHTS


Thursday was unconvincing that any type of weakness had run its course.  Momentum is waning, yet most indices are in the process of completing Exhaustion signals on Daily charts, per Demark indicators.  Prices made back around 60% of the prior day's losses, yet still didn't move back to new highs while being largely range-bound over the last couple days.  Breadth was lackluster, with barely more stocks advancing than declining, while Financials accounted for most of the gains, with barely most of the sectors "hugging the flat line."  Certainly not broad-based by any stretch.   While it pays to be wary of fighting the tape too much in the month of December, it pays to watch carefully which sectors are moving and which ones aren't as the market heads into December Quad-expiration today.   We saw further evidence of the US Dollar index accelerating substantially higher, as the Euro made a monumental breakdown vs USD, (which didn't go unnoticed) while Precious metals were hard hit, as both Gold and Silver fell 3 and 6% respectively. 

Sector-wise, Financials was the only sector to record gains over 1% on the day, and even in this rally we've seen a bit of slowing in the short run, which could lead to pullbacks in the weeks ahead once Treasury yields initial rise has run its course.  While the last two days cast doubt that we've arrived at that juncture just yet, the sentiment and waning momentum amidst a very steep uptrend give pause to trying to initiate new longs in this sector at present, and extreme selectivity is needed.  


Meanwhile, fixed income and FX continue to provide the majority of the excitement these days and tell most of the narrative of what's been happening in the market in December.  The Yield curve has steepened on the front end, yet flattened dramatically when looking at 5s/30s and 10s/30s curves, while the Dollar has accelerated in a near parabolic fashion. 
 

 

 


SPX has begun to wane in recent days, but this hasn't taken the form of any meaningful pullback, but rather some sideways consolidation which has caused momentum to drop off a bit after getting overbought.  Counter-trend Sells are present on daily charts, but not confirmed (Demark) while weekly remain quite premature and require another few weeks of upside before any meaningful signs of exhaustion.  Near-term, weakness still looks possible for a few days, but any pullback should be used to buy with 2200 likely being a floor before additional strength happens into year-end.

 


Monthly charts of the US Dollar index show the extent of the recent gains as they've risen to the highest levels since 2003.  While near-term overbought conditions exist, the broader chart looks quite constructive and should allow for further gains into 2017 which should result in the Euro dropping down to Parity and below vs the US Dollar.  For now, any weakness should prove to be a buying opportunity.

 

Momentum has begun to wane a bit on the Financials sector as its slowed, similar to the rise in Treasury yields, which has taken more of a sideways course of late vs moving straight higher in a steep line.  Counter-trend sells are near for the ratio of Financials vs SPX, and extreme selectivity is needed when buying stocks in this sector given the extent of the gains since early November.  For now, seeing momentum wane while Demark sells loom typically argues for profit-taking.  But until this ratio starts to show greater evidence of breaking down, by the ratio undercutting the 13 and 21 day moving averages, the trend remains positive, yet just a bit flatter than this time last month.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

FOMC Dot shift coincides with US Dollar breakout, stalling in SPX rally

December 15, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2245-6, 2240, 2232-4, 2220   Support
2272-5, 2286-8                       Resistance

 


S&P Futures: (2-3 Days)  Bearish for a move down to 2232, with gains back over 2271 needed to think the worst is over and a rally to 2300 could happen into end of year.  For now, Wednesday's decline looked important and could lead to a bit more weakness into end of week or early next before rallies take hold.

SX5E- EuroSTOXX 50-  Bearish- Pullback to 3100-50 likely in the next few days before rallies take hold.  Counter-trend sells are present which are also seen in SPX right now which could be confirmed and allow for minor backing and filling before a year-end rally.  For now, doubtful we see anything below 3050, with above 3250 being a stop for shorts.

HSCEI-   Pullback likely to stabilize near former lows from November with only a break below 9269 leading to material weakness in the weeks and/or months ahead.  For now the next few days should bring about a test but stabilization and support, not breakdowns.


Longs/Shorts for a 3-5 day period:

Technical Longs:  UUP, EUO, QQQ, GILD, HUM, AMGN, AAPL
Technical Shorts:  ANF, AWI, VFC, KODK, DDD, FOSL, NTES, TRIP, TUP



TECHNICAL THOUGHTS


Some definite evidence of stalling out occurred in global equities yesterday, and while overall weakness proved mild, closing at/near prior day's lows is more suggestive that additional pullbacks might play out this week as opposed to a move straight back up to highs.   The trend has showed a few signs of slowing after such a sharp advance from early December and this often results in a waning in momentum that can allow at least a 2-3 day pullback to unfold before this advance can continue.  For now, most of the weakness has occurred in Defensive, yield sensitive sectors and this could continue further given the further strengthening in rates until there is some evidence of a backing off.

It should be emphasized that any weakness in the days ahead should still represent an attractive buying opportunity into year-end as opposed to the start of a more meaningful top for equities.  Despite the level of overbought conditions present, coupled with bullish sentiment, there hasn't been sufficient confluence of counter-trend sellsper Demark's weekly charts on indices, nor sectors that would justify any sort of meaningful intermediate-term top.  Many of these do appear close to forming, and are present on a daily and/or monthly basis or close, but will still require additional upside to generate the type of widespread confluence that justifies "going the other way" in expecting a larger top (purely from a counter-trend perspective)

Wednesday proved to be quite volatile for both fixed income and currencies more so than equities, with meaningful breakouts in the 2-year yield and ongoing dramatic flattening out in the yield curve, with the US Dollar index breaking out to new highs yet again, reaching the highest levels on a weekly closing basis since 2003.  This served as an initial strengthening point for Financials while being strongly detrimental for Yield sensitive sectors like Utilities, Telecomm, and Real Estate, all which lost more than 1% in trading Wednesday.  Precious metals meanwhile were hit hard, along with stocks correlating with Gold, silver, as the GDX dropped to new monthly lows on Wednesday.  Regardless if the Dot plot stays true for 2017 given the potential mixup in the governing committee, the strong rally in the US Dollar index and Treasury yields tends to be a poor environment for precious metals, and this looks likely to continue.

 

 


SPX has gotten well extended, with prices stretched above the upper end of its 2% Bollinger Band range on weekly charts.  This week's early weakness threatens to give back a bit more into end of week before prices stabilize, but should prove to be a buying opportunity into end of year.  Targets lie near 2243, roughly 10 points below, down to 2232, the 50% of SPX's rally from early December.  This would constitute an attractive area to buy dips for a push back to new highs.  For now, Wednesday's reversal looks to be the start of at least a minor backing and filling for SPX.  The longer that prices remain at current levels without moving to new highs, the greater the likelihood of at least a 2-3% pullback before a push back to new highs.   Last week's lows of 2200, however, should not be breached in this scenario before a move back to new high territory.  

 

 


US Dollar index has managed to exceed the last four week's highs Wednesday, and while prices backed off a bit late in the day, this looks to be the start of a sharp acceleration which should help prices extend in the weeks ahead.  EUR/USD moving down to test critical support near 1.05 should prove temporary before a break that allows the Euro to pullback to parity with the Dollar, which has become much more likely technically with this week's move.  While stretched based on Wednesday's move, ETFs like UUP and EUO both look like attractive longs to consider in the weeks ahead to play a rising US Dollar, along with shorting EEM, for the Emerging markets and Gold, which could underperform given this move.

 

 

Emerging Markets ETF (EEM) has shown some evidence of reversing course after the near 3% pullback Wednesday given the rising US Dollar and additional weakness looks likely in the short run which should test and break recent lows made in mid-November near $34.  The base from 2012 broke down last year, and while prices rose to retest this area of the breakdown, the failed into November lows before the one month bounce attempt.  Wednesday's decline severed the one-month trend and makes a test and break of November lows much more likely. 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

 

NEWTON ADVISORS WEBSITE

QQQ Breakout bodes well for additional Technology strength

December 14, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2245-6, 2240, 2220        Support
2272-5, 2286-8               Resistance

 


S&P Futures: (2-3 Days)  Above average chance of at least minor stalling out post FOMC.  Trend bullish but overdone and signs of counter-trend sells per Demark- Key will be to see prices make a meaningful reversal back to new multi-day lows which really hasn't been seen throughout December.  Prices nearing initial targets, while NDX looks to be preferred vs the two for outperformance

SX5E- EuroSTOXX 50-  Stallout likely in the short run, with 3258, the 50% retracement of the entire move down from Spring 2015, being important.   On any sort of pullback in the next few days, however, pullbacks should be used to buy, as the index has grown structurally move positive given the recent ramp up in recent days.

HSCEI-   Bullish- Monday's decline didn't change much structurally, and prices would require a move down under 9624 before thinking additional weakness might occur.  For now, a move back to 10400 still looks possible


Longs/Shorts for a 3-5 day period:

Technical Longs:  QQQ, GILD, HUM, AMGN, AAPL, MSFT, MRK, UNP, CONN, MTSI, EXP, ALGN
Technical Shorts: KSS, ANF, FOSL, NTES, TRIP, TUP



TECHNICAL THOUGHTS


NASDAQ 100 finally joined the party, with NDX, QQQ clearing former highs which had kept the trend range-bound over the last couple months, allowing for outperformance in this and in Technology which has jumped over the last few days after nearly two months of lagging the broader market.   (Weekly Technical Perspective , sent out Monday am-12/12/16, addressed this Tech outperformance )  While Semiconductor issues had already made new highs for 2016,  sub-indices like the S&P 500 Software index closed at the highest levels since October at 1171.42 (S5SFTW in Bloomberg) while the S&P 500 Tech Hardware index did in fact make new highs for the year on Tuesday, (S5TECH) with strong outperformance by the Drive makers STX, WDC, along with JNPR, AAPL, MSI and TEL, all up more than 1%.   This catch-up is constructive in these other groups which had shown recent underperformance and now are starting to show evidence of a more balanced, broad-based rally in Tech.  However, at this time, the MSH/SPX ratio is STILL in a downtrend, so still important to be selective in what to own.

Heading into FOMC day, we see the spread between Treasuries and Bund yields widening back out again, while Treasuries have continued to weaken, albeit in a stair-stepping manner prior to FOMC, given the fact that Fed Fund Futures had factored in a 100% chance of a hike today.  Today's post meeting press conference could allow for volatility as the Dot plot going forward with regards to speed of upcoming hikes as this will surely be on most investors minds given the recent uptick in economic activity.    For Wednesday, there still remains precious little evidence of any real reversal in TNX just yet, and TY yields will need to undercut 2.33% to expect a pullback to 2.20%, and/or 2.00% which seems likely given the recent pessimistic Treasury sentiment per CFTC data, shown in yesterday's report.  For now,  yield curves flattened out quite dramatically on Tuesday given potential short covering on the long end, along with a better than expected Auction, and additional near-term flattening in the 10/30 and 5/30 curve looks likely in the days ahead.

Sector-wise, Healthcare and Technology remain the two sectors which look to be well positioned for further outperformance into year-end, while the Defensive groups like Utilities, Telecomm and REITS have all begun to strengthen given the signs of Yields beginning to stall out in recent days.   For now, given the lack of meaningful pullback in Financials while Technology has started to join the rally, breadth has expanded, yet there remain legitimate issues with regards to the momentum in breadth, which has failed to show the same kind of strength as SPX prices of late, as most of the rally looks to have occurred in Financials, Industrials, and Energy and NOT in Tech, Healthcare, which remain two key pieces to the puzzle, sector-wise.
 

 


QQQ managed to successfully exceed former highs which had held for the last few months, suggesting additional strength in the weeks ahead, into year-end.  While prices had gotten stretched in Small-caps (Russell) and SPX of late, along with Europe, NDX had failed to participate and join this rally until Tuesday, which looks to have resulted in a meaningful jump in Tech Hardware to join some of the recent strength in Semi stocks.  Near-term, QQQ should be favored for additional strength into year-end, and any near-term pullbacks serving as buying opportunities. 

 

 


10-Year Treasury yields ongoing Stair-stepping rally along with sentiment growing increasingly bearish bodes well for Bond bulls heading into year-end, as the last few occasions where CFTC Non-Commercial Specs assumed such a negative stance, yields dropped substantially in the 1-3 months that followed.  Momentum has failed to follow the move in yields higher, and should present some kind of stabilization in Treasuries which allows for an above-average bounce.  For now, yields have failed to show sufficient signs of dropping which might suggest that a larger yield pullback is underway.

 

 

Treasuries along with the Yield curve are important to focus on given today's FOMC meeting and when looking at the slope of the yield curve, we've seen a meaningful downturn in the last couple days, with 10s/30s curve falling to new multi-day lows.  Some of this can be pinned on the Auction potentially which came in better than anticipated, while many might be covering shorts ahead of Wednesdays announcement.  For now, this flattening out in 10/30 and 5/30 curve suggests that further yield curve compression is likely in the weeks ahead.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Energy & Healthcare take charge as Financials wane ahead of FOMC

December 13, 2016

S&P MARCH FUTURES (SPh7)
Contact: info@newtonadvisor.com

2245-6, 2240, 2220, 2200-1        Support
2258-9, 2270-1,  2276-7              Resistance

 


S&P Futures: (2-3 Days)  Bullish- Prices look to extend up to 2270-5 into the FOMC on Wednesday before any sort of real stalling out and/or a minor trend reversal might get underway

SX5E- EuroSTOXX 50-  Bullish into Wednesday- Despite being overdone, another couple days of rally look possible before at least a minor pullback gets underway with strong resistance near 3258, or the 50% retracement of the entire move down from Spring 2015.

HSCEI-   Bullish- Monday's decline didn't change much structurally, and prices would require a move down under 9624 before thinking additional weakness might occur.  For now, a move back to 10400 still looks possible


Longs/Shorts for a 3-5 day period:

Technical Longs:  AAPL, MSFT, MRK, GD, BWP, TYLS, UNP, CONN, MTSI, EXP, ALGN
Technical Shorts: DAL,TWTR, TRIP, TUP, HTZ,



TECHNICAL THOUGHTS


The blowoff which began a few weeks ago keeps the near-term bullish and should allow for additional upside into the FOMC meeting with targets near 2270-5 into Wednesday before a minor backing and filling occurs.  Monday's selloff attempt failed to gain much traction, with prices pulling back fractionally, yet failing to take out last Friday's lows while breadth finished at a meager 2/1 negative.    Both the US Dollar index and Treasury yields finished negative after early rally attempts in both USDJPY and TNX and heading into the FOMC, we have evidence of upside exhaustion in both which looks to result in some minor weakness post this week's Fed meeting which might negatively affect Financials. 

The key move Monday occurred in WTI Crude with prices surpassing important resistance which has held since June and should allow for further gains in the days and weeks ahead.  As charts show below, prices effectively got back above a lengthy consolidation range for Crude, and while there remain viable questions as to the enforcement of any Output cut, prices need to be respected, and particularly breakouts which make new multi-month highs which occurred Monday.  Additional strength looks likely for Energy and should continue into year-end.

Near-term, we've begun to see some definite evidence of yield sensitive sectors rallying ahead of Yields turning down, with extreme oversold conditions in most Bonds across the globe on a very short-term basis.  Utilities, Telecomm and Real Estate were all outperformers on Monday while Real Estate outperformed all other 10 sectors in Monday's trading. 

 

 


S&P still shows little evidence of any meaningful pullback getting underway, despite Monday's minor weakness.  Prices could fall down to 2240 without doing much damage and still look to push up to 2270-5 into Wednesday's FOMC results before some backing and filling is likely as the Conference gets underway.  For now, this hourly chart covering the last week in S&P shows the rally and minor drawdown which occurred Monday, providing a good buying opportunity for longs looking to catch further gains in the2- 3 days ahead.

 


WTI Crude's breakout resulted in a huge early surge for Energy prices before a pullback that finished just fractionally above October highs into the close, right near levels that were hit back in June.  This still looks important as a breakout, despite the late day pullback, and intra-day weakness should be used to buy with targets in the high $50s, low $60s before any meaningful top.   Energy stocks have responded quite positively in recent days and Energy Services and Drilling names should fare better than Integrated oils in the near-term as Crude advances.

 

 

One thing that's important to shed some light on, is the degree to which Treasury sentiment has turned quite bearish ahead of Wednesday's FOMC meeting with Non-Commercial Spec futures shorts reaching the most negative level since 12/2014 along with Spring of 2012.  Both of those occasions, we saw yields back off .70-100 basis points in the 1-3 month periods after.  Given that near-term momentum is quite overbought and long-term downtrends for yields remain intact, it's logical to think that a larger than expected Treasury rally is right around the corner just at a time when it's least expected amidst a time of growing economic strength.  Technically, yields have begun to show evidence of negative momentum divergence on daily charts, and it looks doubtful technically that yields should move too meaningfully above 2.50% before reversing to pullback to 2.20 or even 2.00% in the months ahead.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Transports moving back to new all-time highs is positive, offsetting bullish sentiment and lackluster breadth

December 8, 2016

S&P DEC FUTURES (SPz6)
Contact: info@newtonadvisor.com

2210-2, 2188-9, 2179, 2164-6     Support
2244-6, 2257-60                          Resistance

 


S&P Futures: (2-3 Days)  Bearish- S&P's move has run a bit too far, too quickly and some backing and filling is needed before we can climb much further.   2240-4 is important on the upside for Thursday/Friday to sell into, while pullbacks are likely contained near 2210-2. 

SX5E- EuroSTOXX 50-  Bearish-  Stalling out likely after SX5E broke out of four-month consolidation range to the upside to test areas near April highs.  While certainly a bullish move in the last couple days, similar to S&P, we've run too far, too quickly and some backing and filling is sorely needed.  Look to buy dips at 3053-3075.

HSCEI-   Bullish- Movement up to 10400 looks likely and should be favored for near-term outperformance.  HSCEI broke the trend from September and has remained loyally above. 



Longs/Shorts for a 3-5 day period:

Technical Longs:  MRK, UNP, CONN, STML, MTSI, KOL, PAAS, SLV, UTX, TXT, EXP, ALGN
Technical Shorts: UUP, D, CMS, DTE, TRIP, TUP



TECHNICAL THOUGHTS


Much of the excitement Wednesday revolved around the breakout in the DJ Transportation Avg, which vaulted over 9310 for the first time since November 2014, nearly an exact two-year anniversary of former highs, which failed to act like any real resistance.   The S&P's rise to new highs, meanwhile, has still not been accompanied by any such more in the Nasdaq 100 in recent days, which remains down under key resistance at 4900.  While sectors like Consumer Discretionary and Materials have begun to pick up some slack, the rally continues to be dominated by Financials outperformance in the short run, which along with Industrials,  represent two of the only sectors which have shown meaningful performance in the last month, both showing returns of greater than 10%.   In data through 12/6/16, S&P was higher by 1.1%, while seven S&P major GICS Level 1 sectors were down in the last week.  While the TRAN and SPX move back to new highs are certainly positives,  the rally thus far is not nearly as broad-based as might be expected given the lack of Tech strength.   Near-term, the following continue to be important points worth monitoring

1) Italian and Spanish yields have broken support and have turned lower after peaking out in mid-November.  Whether or not this leads to German Bund yields or US Treasury yields making a similar move, it should be monitored carefully in the days/weeks ahead.

2) European Banks ETF, the SX7P, provided the bulk of the outperformance which served to cause SXXP, SX5E to break out to new multi-week/month highs in the last couple days, exceeding key 3+ month trendlines.  Europe is likely to outperform the US in the short run, but we still have a difficult time making the case for more substantial intermediate-term outperformance. 

3) Tech remains a laggard.  Despite IWM having moved back to new monthly highs, the NDX remains range-bound and most Technology gauges such as the MSH index, the Equal-weighted basket of 35 various Tech stocks from all different sectors, remains under pressure vs SPX and has not yet turned higher.

4) DJ Transportation Avg move back to new all-time highs confirms the move in Industrials from a Dow Theory perspective and after two years of lagging, this finally can join the other indices in unison back at new high territory, which is a definite positive.   For now the ramp up in sentiment and lack of breadth are two negatives that might seem important, but given the seasonality any bearish price behavior at this point looks to be pushed off into January.
 

 


NASDAQ 100 index continues to lag and represents one of the main issues confronting this market right now which is holding back many breadth and momentum indicators from showing a much more positive picture.   Technology has been the chief culprit, and this group has lagged performance for the last few months, turning in negative performance for the rolling 3-month period ending 12/6/16 with -0.7% returns vs SPX having moved higher by 1%.  This chart might look ominous as a potential Head and Shoulders pattern, but only presents real danger if recent November lows are broken.  Otherwise, this represents just consolidation that should lead back to new high territory into year end.   Most weekly counts don't support the notion that we're at a peak right now just yet for NASDAQ, so this can afford to move North, but will need to show some evidence of technical progress in the days ahead.

 


The Morgan Stanley Technology index, the Equal-weighted index of 35 members of Technology from various sub-sectors, has been in a decline since mid-October and this chart above details the degree to which MSH has underperformed the SPX and has trended lower.  Most weekly charts show the group to be close to bottoming, but it will need to breakout above downtrends to have some evidence that this can begin to work.

 

 

Italian and Spanish yields have both turned down in the last couple days, breaking under support which has held for the last month and could serve as a catalyst for Financials to consolidate recent gains which in turn might show up in the US in the near future.  Most Treasury yields have held up in resilient fashion ahead of this month's FOMC meeting, but are vulnerable based on the combination of Sentiment, overbought conditions, and counter-trend signals of exhaustion that should make a continued rally in Yields along with the Financial sector, difficult without any kind of pullback.  For now, it's important to watch 2.28% on the 10-year Treasury yield, which if violated, should lead down to near 2.15% or even 2.00% which would be an attractive risk/reward area to sell Treasuries.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Financials & Small-cap Strength continue to drive equities higher globally, despite breadth concerns

December 7, 2016

S&P DEC FUTURES (SPz6)
Contact: info@newtonadvisor.com

2202-3, 2179, 2164-6          Support
2213-4, 2220, 2230-1          Resistance

 

 


S&P Futures: (2-3 Days)  Bullish, despite S&P's pushing up to within striking distance of highs, a move over is expected.  Upside to 2235-2240 possible into year end, and 2179 remains a stop for longs.

SX5E- EuroSTOXX 50-  Bullish-  Europe has taken the lead thanks to European Banks in the last few days, and SXXP and SX5E are arguably breaking out which should lead to upcoming outperformance vs SPX.  Long with a test and potential breakout above 3150 likely into year-end and under 3047 needed to cancel out a near-term bullish view. 

HSCEI-     Bullish- Pullback held where it needed to before Tuesday's bounce- Movement back higher to 10k initially and over leading to 10400.


Longs/Shorts for a 3-5 day period:

Technical Longs:  CONN, STML, MTSI, KOL, PAAS, SLV, UTX, TXT, UBNT, EXP, ALGN
Technical Shorts: UUP, TWTR, D, CMS, DTE, TRIP, TUP



TECHNICAL THOUGHTS


The push back higher to test recent all-time highs in S&P continues to be dominated by Financials, in a sharp move which has resulted in breakouts in SXXP as European Bank ETF's have demonstrated above-average upside strength of late.   European, Asian and US indices have begun to move higher, and while breadth might not be ideal, we are still witnessing good structural strength in the indices.  NASDAQ 100 remains the laggard in this regard and there continues to be no convincing signs that Technology has begun any sort of sharp advance back to new highs what would indicate any type of leadership potential, but fornow, the rally should be respected given the seasonality and the structural progress, which puts the breadth concerns and uber-optimism on the back burner during December.

The breadth has been an issue of late and has to be mentioned that in the last two weeks we've seen the Percentage of Stocks trading above their 10-day moving average drop down to 50% from over 80% which was reached two weeks ago.  The Percentage above their 50-day m.a. for SPX is 63%, a far cry from the 85% + which was hit back in March, or in July, and is a definite concern for 2017, regardless of the near-term bullish price structure.  McClellan's Summation index also stands at a fraction of levels which were hit a few months ago, and as a smoothed version of the McClellan Oscillator measuring Advance/Decline data, is an additional pressing concern.  Those issues mentioned a couple weeks ago regarding Financials and Industrials being two of the only sectors showing strength has not really changed all that dramatically.  Technology remains a laggard and has its work cut out for it, to show some necessary outperformance to lend some credibility to this move.

At present, Global bond yields have been pressing higher across the globe, with breakouts evident in the German 20-year Bund yields and near- Breakout for the 10-year.  Our own US Treasury Yields have risen parabolically, yet have given precious little signs of any rollover, despite some evidence of upside exhaustion.  This remains paramount to keep under the radar in the days and weeks ahead.  While this might seem unlikely ahead of the FOMC meeting on 12/14, any downturn in yields would cause underperformance in Financials at a time when the market can ill-afford any such lagging tendencies.   Some charts to illustrate some of this price action are shown below.
 

 


Russell 2k continues to gain ground, as its minor pullback attempt lasted only around four days before pushing back to new highs on an absolute and relative basis.  This chart of RTY vs SPX shows the upward parabolic move in the Russell 2k since early November which has now gained over 16% from trough to peak measured from the 11/3/16 lows.  No signs of any weekly exhaustion is present, which indicates that any pullback attempt in the near-term should prove short-lived and buyable.  For now, upside targets lie near $140.

 

CESIg10.gif


The Citigroup economic Surprise index of the G-10 shows economic data beating expectations at a very sharp clip these days, having just exceeded former Summer 2016 highs to reach the highest levels since early 2014.   So the data hasn't been just US related in terms of Economic growth, but we've seen data turning up globally in a manner that has beaten expectations.

 

 

SXXP, the STOXX 600 index, has risen to the highest closing levels since October based on Tuesday 12/6's close.  This is near levels hit Monday on an intra-day basis and also in mid-November, but is clearly a positive development that reflects the European Bank progress, more than any "Anti-Renzi" sentiment that is driving this rally following last weekend's "NO" vote on the referendum.  EUFN, the Ishares MSCI Europe Financials ETF, has broken out and accounts for quite a bit of this recent push higher, not dissimilar from what's happening in the US right now.  In the short run, ETF's like EZU, which tracks the European Union shares, has turned positive in relative terms to the US and should be overweighted relatively speaking for near-term outperformance.   EUFN has become stretched, but any consolidation here is also likely an attractive opportunity to buy/overweight this for further upside progress.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Yields and stocks both look to have another 1-2 days before price settles

November 11, 2016

S&P DEC FUTURES (SPz6)
Contact: info@newtonadvisor.com

2113-5, 2097-8, 2081-3,  2028-30          Support
2168-70, 2181-2, 2196-7                        Resistance


S&P Futures: (2-3 Days)  Bullish- Despite the degree of near-term overbought conditions, it's tough calling for any sort of meaningful snapback in the short run.  Prices look to be able to retest highest hit on Thursday near 2180, with August highs directly above.  Dips to 2122 and/or 2106 are possible into next week, but for now, additional upside still looks necessary before any consolidation.  2147, Thursday's lows, are important in this regard for the next 1-2 trading days.

SX5E- EuroSTOXX 50-  Neutral- Prices extended higher to near late Oct highs before failing into end of day.  For now, one can make an equal case for a rally back to 3110 vs a pullback to 3000.  The broader pattern remains unconvincing.  Under 2039 could result in a larger selloff.

HSCEI-Neutral Rallies back helped HSCEI to hold the consolidation but for now, not much faith can be put in any sort of meaningful rally.  Pullbacks down under Thursday's lows at 9328 argue for additional downside.  While above 9873 would change the picture to more constructive.


Longs/Shorts for a 3-5 day period:

Technical Longs:  CLX, KMB, ODFL, GNRC, PLNT, ADI, UNP, FDX, PYPL
Technical Shorts: GDX, ALV, UNG, VNQ, FOSL, PHM, ITB, TRIP



TECHNICAL THOUGHTS


Near term upside could prove limited given the degree to which markets have lifted in recent days, though 2183-5 and 2196 both remain viable targets into mid-next week.  From midnight Tuesday until mid day Thursday, S&P surged more than 8%, coming within 4 ticks of August highs .  DJIA along with DJ Transports have both broken out, though Nasdaq has shown some evidence of not cooperating , with Tech proving much weaker than what might be expected

While breadth has been weaker than normal in the last couple days, with yesterday's Advance decline even showing more Down stocks than Up, the action in the financials and industrials has been quite impressive, and both broke out to multi month and year highs, exceeding the entire base in place for both throughout much of 2016

 
Meanwhile treasury yields have vaulted up higher in a manner that is quite bullish for further yield gains into end of year , though near term yield gains have made daily charts also very stretched, and yields will require consolidation.  Both 10 and 30 year Treasury yields broke out above meaningful resistance this past week, which was behind much of the upward outperformance in FInancials.

 

 


The S&P's gains now have stalled out after the dramatic surge, but the resulting pullback thus far isn't all that meaningful, and one can make a good technical case for another stab at 2185, or even 2196 into early next week before any selloff.  Thursday's weakness down to 2147 makes this area important if retested as support.

 

hlthD.gif

 


The recovery in Healthcare follows one of the larger droughts since it peaked in mid-2015.  Recent weakness from August highs wasn't that apparent on absolute charts, but managed to fall to a key area of trendline support , stabilized and is now starting to bounce.  XLV was down over 11% in 3 months, and the group was negative on a YTD basis the most of any sector until the last few days.  The ability to snapback gels with how the relative chart in XLV/SPX looks above, as ratio charts bottomed near a key area that has held over the last year as a relative low vs SPX for buying pullbacks.  Additional strength looks likely into new year and next given the degree of mean reversion that typically happens to Bottom feeding sectors starting in the next few weeks.
 

 

 

Developed markets made a substantial move to break out of the downtrend vs Emerging in the days ahead. The chart above highlights the MXEF vs the standard S5RLST and given the recent US Dollar strength while rates have moved up fairly sharply. 

 

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Surge in YIelds, Equities constructive; XLF, XLI at new highs

 

November 10, 2016

S&P DEC FUTURES (SPz6)
Contact: info@newtonadvisor.com

2113-5, 2097-8, 2081-3,  2028-30          Support
2168-70, 2181-2, 2196-7                        Resistance

 

 


S&P Futures: (2-3 Days)  Bullish- Prices made good structural progress, though upside could prove limited over the next 2-3 days, but better to be bullish and look to buy any dips given the chance.  Upside likely to 2168-70 and then 2182-3, with dips down to 2130, 2113 being good buying opportunities.

SX5E- EuroSTOXX 50-  Bullish- Push higher up to 3100-50 should happen after SX5E made a similar move as S&P-  However, as noted previously, the broader pattern remains unconvincing.  Under 2039 could result in a larger selloff.

HSCEI- Bearish-  Movement down under 9470 will need to be recouped immediately to avoid a larger breakdown and for now, Wednesday's breach looks important, but failed to enjoy the rally seen by either US, nor Europe, so for now, until we see proof of a snapback, the trend here is in worse shape than US or Europe short-term until 9470 can be recouped.  Above 9873 would change the picture to more constructive.


Longs/Shorts for a 3-5 day period:

Technical Longs:  CLX, KMB, ODFL, GNRC, PLNT, ADI, UNP, FDX, PYPL
Technical Shorts: GDX, ALV, UNG, VNQ, FOSL, PHM, ITB, TRIP



TECHNICAL THOUGHTS

Wednesday's about-face from Midnight on Election night back higher proved to be one of the more volatile snapbacks in history, rivaled only by the price action during the tumultuous 2007-2008 period.   The act of getting back over Tuesday's highs proved quite positive allowing for nearly a 10 point late rally that cleared the highs of the consolidation since mid-September.  The DJIA and NASDAQ managed similar feats, and by end of day, all indices were in better position than where they started the day, technically speaking.

A key driver for market gains was based on action in the Financials, which rose sharply given the surge in Treasury yields up above 2.05% by the close Wednesday.  XLF broke out to the highest levels since 2008 while Financials continued their above-average outperformance and relative charts of XLF/SPX reached the highest levels since last December.

Yields had nearly a big of a range as equities as the 10-year rose from 1.71% over 2.05% just on Wednesday alone.  This coincided with a sharp steepening in the yield curve, and the 10 and 30-year yield broke downtrends from late 2013, nearly a three-year downtrend in the process.   Wednesday's reversal goes a long way towards thinking a move higher into year-end could be underway.  However, given the extent of Wednesday's move, some backing and filling could be necessary.

One thing to mention was the extent that breadth did not follow suit Wednesday, as nearly five sectors were down on the day, so despite the very strong outperformance by Financials, Industrials, and Healthcare, other sectors like Technology, were down on the day.  Consumer Discretionary also finished flat, with little gain.  So much of this talk about indices closing in on new all-time highs is accurate, but breadth will need to follow suit to have conviction.  This "Did" happen earlier in the week, so potentially this could have simply been a "Back and fill" for breadth.  But the dispersion was notable given an advance/decline of just 3/2 positive on such a strong day.

Overall, the positives of DJIA and TRAN breakouts of late, combined with Treasury yield breakouts (which should be conducive to Financials doing well, are certainly positive, and technical structure has indeed improved in the short run, both for US indices and for the Bloomberg World index.  Breadth remains a concern in the bigger scheme of things as gauged by the Summation index, but we have seen a rapid jump in the Percentage of stocks trading above their 50-day ma to over 50% which had been lacking of late.  This is also reflected in the Advance/Decline, which recouped about 50% of what it had lost since mid-September.  For now, it looks likely that indices could consolidate Wednesday's gains, or continue up a bit more.  But the threat of an immediate larger pullback now seems postponed.
 

 

 


The S&P's huge drop erased about 110 S&P points in about 2 hours on Tuesday evening.  Prices went on to trade nearly limit down and have erased 1/3 of the January-August advance officially based on overnight trading.  While near-term momentum is oversold, additional selling down to test June lows near 1972-83 near the 50% retracement area is possible before any rally.  For now the market seems clearly caught off guard and some sign of stabilization will be necessary before thinking any rally back to the highs can occur.  The level of uncertainty in several categories justifies a defensive stance.

 


Treasury yields completely flip-flopped on their breakdown, very similar to Equities, starting around Midnight on Election night when a Trump win was deemed a high probability.  Yields turned higher, along with Equities and skyrocketed up to 2.00% and over by the close, effectively breaking out of a near 3-year downtrend from late 2013 highs.  While stretched and additional resistance from highs in the mid-90s stretched across highs targeting 2.35%, while long-term trends from the 1987 highs hits near 3.00% which will be important to cross before weighing in on any larger breakout in yields.
 

 


Financials made a decisive move to the upside following the Yield breakout in 10s and 30s, and XLF rose to the highest levels since 2008.  Prices are extended near-term, in both the sector and also in Treasury yields, but a constructive move structurally in moving to new highs which should result in higher prices between now and end of year.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

 

NEWTON ADVISORS WEBSITE

 

 

Newton Advisors, LLC. info@newtonadvisor.com 203-339-2944

Financials breakout relatively vs SPX, & continue to lead August performance

August 31, 2016

S&P SEPT FUTURES (SPu6)
Contact: info@newtonadvisor.com

2167-9, 2157-9, 2139-41      Support
2182-3, 2190-1, 2200-2        Resistance

 

 


S&P Futures: (2-3 Days)  Bullish-  Tuesday's minor weakness failed to do any technical damage, and the trend remains mixed, with a bullish bias for prices to rise back to new high territory.  Yesterday's comments remain in place..For now, until prices can get OVER 2186.75 in S&P futures, or last Friday's highs, the trend remains near-term range-bound.   Rallies should begin into and after Friday's Jobs report, with any near-term pullbacks likely buyable with thoughts that last Friday's lows should NOT be taken out before prices move OVER 2186.75.

SX5E-Bullish, with targets near 3100-3150 into early September.  Tuesday saw a rally back to multi-day highs for SX5E and additional strength here looks likely into end of week.  Targets   Only bearish on move under 2890.

HSCEI- Bullish- Tuesday's close at new multi-day highs after hitting trendline support is bullish, and should help this extend to 9731, with movement over that leading to 10,000



Longs/Shorts for a 3-5 day period:

Technical Longs: C, AFL, CINF, MMC, AON, AIZ, GRUB, PAYC, YUM
Technical Shorts: AEP, FE, PNW, PPL, SHLD, TRIP



TECHNICAL THOUGHTS


Equity weakness has done no damage, & technically speaking, it's still right to expect move to test/exceed highs.   Minor pullback to the tune of -0.20% having little or no effect on the larger 45 day trading range in place,  with Tuesday's 2176.12 close in SPX cash index finishing within 3 points of levels hit back on July 20th.  The weakness Tuesday failed to take out the prior day's lows, and both bonds and stocks sold off fractionally, as the US Dollar's advance continued. 

A few important points to make regarding Tuesday:

1)  Financials managed to break-out of their relative range vs the SPX, with the Guggenheim Equal-weighted RYF closing above its one-year trendline vs SPY.   Sector ETFs like KBE, XLF, KRE, IAI, RYF all moved to new highs for 2016, while the Insurance rally (mentioned yesterday) continued ever higher, with KIE extending its gains further in all-time high territory.   This should give a boost of confidence to a market which has been churning with little or no direction, and many on Summer vacation fail to recognize the extent of the bullish sector rotation in place within these groups when noticing the net change of US Equity indices.  Yet, stocks managed to show some very positive breakouts above intermediate-term trendlines in a formerly lagging sector like Financials that has only recently begun to show meaningful signs of mean reversion.  As of Tuesday's 8/30/16 close, Financials were the Best performing sector for August, and with one trading day remaining, had returned 3.48% for the month.  An impressive showing no doubt.  If the upcoming Jobs report delivers and the FOMC finds itself with markets at or near highs, you can expect this sector to likely continue to shine throughout September, despite the bearish warnings on poor performance.  For now, there remains little to no signs of any sort of price deterioration. 

2) US Dollar rally has coincided with Commodities cracking under key July support lows, which also has had the effect of verifying the recent intermediate-term trendline break as being a legitimate trend violation. Commodities like Gold have flirted with breaking down, and another few days of Dollar strength would continue to likely put pressure on this group.  However, if any sort of material Jobs weakness comes about on Friday, the majority of this Dollar strength could be given back, and would be a buying opportunity for Gold.  For now, under 1310 in Gold could lead quickly down to initial support near 1285.

3) An odd day Tuesday when stocks sell off, yet Financials are the sole group "in the green" to show solid 0.80% performance while Utilities selloff more than 1% on the session.  The Defensive trade continues to underperform, and XLU getting under early month lows on a relative basis should give way to 2-3 additional days of weakness for "the Utes"  Transportation meanwhile along with Small-caps showed steady outperformance and Airlines closed at multi-day highs (XAL) which is another encouraging point about Tuesday's trading when scanning for sector out/underperformance. 


Some charts and additional comments below

 

Financials outperformance relative to the broader market is a key technical development to highlight ahead of one of the most important Fed meetings of the year in a few weeks.  A breakout in relative terms from a group which represents 16% of the SPX, the second largest group to Technology, is a constructive move which should add some "tailwind" to the SPX as it approaches "Jobs Friday" with the NFP report due on 9/2.   For now, with KBE, KRE, IAI back at new highs for the year, this sector should continue to be overweighted tactically for additional gains.

 

Continuous Commodity index's crack of key support at July lows suggests additional near-term weakness for Commodities which could also negatively affect Energy and Materials in the short run.  The US Dollars strength has been directly responsible for weakness in the Energy and Grains complex for commodities priced in Dollars, and many such as soybeans, Wheat, Crude oil, Gasoline, Cotton, Sugar all fell more than -0.70% on the day Tuesday.   This seems to be a breakdown worth following in the short run, which isn't likely to reverse course right away.

 

Utilities weakness is also something to highlight, given the break below early August lows and its own violation of this longer-term trendline.  An additional 2-3 days of weakness looks likely for the "Utes", and Defensive still look early to overweight into this Friday's Jobs number, given the breakdown with accelerating downside momentum.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Insurance Breakout to new highs fuels Financials

August 30, 2016

S&P SEPT FUTURES (SPu6)
Contact: info@newtonadvisor.com

2167-9, 2157-9, 2139-41      Support
2190-1, 2200-2, 2208-10      Resistance

 

 


S&P Futures: (2-3 Days)  Bullish-   Until prices can get OVER 2186.75 in S&P futures, or last Friday's highs, the trend remains mixed.  But Monday's action was quite constructive in US Equities with a meaningful rise which takes away much of the near-term negativity.  Both US and Europe remain in good technical shape near-term.  Pullbacks should be buyable in the next 1-2 days with thoughts that last Friday's lows should NOT be taken out before prices move OVER 2186.75.

SX5E-Bullish, with targets near 3100-3150 into late August-  Nothing changed sufficiently with Thursday's minor pullback, which failed to even break down under Wednesday's lows, leaving the minor rally from late last week largely intact.   Rallies up to 3100 look likely.   Only bearish on move under 2890.

HSCEI- Bullish- Thursday's ability to hold up above Wednesday's lows and produce an "Inside day" should help prices start to turn back higher.  Area at 9340-50 should be support to buy, while any close back up OVER 9640 would mean the move back to 10,000 is back underway.


Longs/Shorts for a 3-5 day period:

Technical Longs: CINF, MMC, AON, AIZ, GRUB, PAYC, EA, YUM,
Technical Shorts: NVDA, FE, PPL, SHLD, TER, TRIP



TECHNICAL THOUGHTS


US Equity indices continue to show fairly amazing resilience in the wake of ongoing uncertainty about the speed and timing of Fed rate hikes along with more meaningful evidence of any sort of durable economic strength.  While we entered this week a bit uncertain of the near-term direction on a short-term basis, it looks increasingly likely that stocks will push back up to new high territory before any meaningful top is in place.   Monday's price action brought about above-average strength in Financials, Materials, as well as Defensive strength coming from Utilities, Telecomm and Energy.  Breadth finished at around 2.5/1 positive, while volume flowed into Advancing issues by a nearly 5/1 margin.  So over 80% of the volume flowed into "UP" vs "DOWN" stocks on Monday

When digging a bit deeper, Financials were the rare "bright" spot in trading on Monday, despite the fact that Yields fell and gave back some of last Friday's breakout attempt.  Financials now have outperformed all other nine S&P GICS Level 1 groups for the month of August with two days remaining, with returns of 2.66% through 8/29/16.  Banks, Brokers and Insurance all showed above-average gains, while Insurance stocks rose to new all-time highs, as per the S&P SPDR Insurance ETF, (KIE)  While Property and Casualty has outperformed Life and Health stocks over the past few years, we saw some definite recovery in names like LNC, PFG, UNM which had been former underperformers, but have rebounded.  While some stocks such as RGA, GNW, TMK have shown very sharp breakouts and strength of late, others like AFL, ICNF, MMC, AJG, AON, AIZ might be better technical risk/rewards given the intermediate-term strength coupled with near-term consolidation.   Overall, the act of getting back over three prominent highs made in the last year in KIE as this hit new all-time high territory is seen as a bullish development for the intermediate-term, while lifting this up to short-term overbought levels.  Given such success in breaking out over the last few days, any pullback likely should constitute an excellent opportunity for buying dips in these names.

Financials as a group have approached a fairly important area of make-or-break resistance when looking at either Equal-weighted Financials, or the XLF vs SPY, when graphed in relative terms.  Whether or not the group can truly "Breakout" will likely depend on both a stronger than average "Jobs" report this coming Friday, along with Treasury yields continuing to press up at a slow pace into the FOMC report in mid-September.  If the FOMC decides to hike rates, this in turn should help the US Dollar and Treasury yields to continue their most recent rally which in turn, should help the Financials.   However, the failure to hike rates .25 bps if indeed the market factors this in as being "likely", then we'd likely see a sharp about face in the US Dollar and in Yields, which could plummet back to lows.  This in turn would likely coincide with weakness in this group, which takes on particular significance given its 16% weighting in the SPX, the second largest group in the market.    For now, the move higher in Treasury yields last week gave a bit back on Monday, whereas German and UK yields seem positioned to attempt their own short-term breakouts. 

Given this ongoing sector rotation, with money flowing back into Financials, it seems absurd to bet against Stocks making new highs given that indices are 1% away, with little or no signs of material weakness with sectors like Financials starting to strengthen in meaningful fashion.  Stay tuned.



Some charts and additional comments below

 


S&P moved back into its consolidation after failing to extend losses early in the week, and Financials strength helped to support indices and help carry prices higher.  Near-term, the technical picture has improved froma few days ago, but remains largely locked in range-bound consolidation which hasn't really changed hardly at all from mid-July.

 

 

Financials vs S&P have turned sufficiently higher to suggest additional strength can occur ahead of next month's FOMC, but as this chart shows above of the Equal-weighted Financials (Guggenheim RYF) vs SPY, we haven't seen official breakouts of this sector yet that would warrant any type of intermediate-term overweight.  Breakouts in the Financial sector likely can't happen without a similar breakout across the yield curve in Treasuries, but would serve to give some serious Tailwind to Equities in the typically bearish month of September.  For now, Financials have led all other groups for the month of August, and look to continue a bit higher, but the real test awaits.  

 

Insurance stocks, on the other hand, have strengthened sufficiently to suggest this sub-group has officially made an intermediate-term breakout, which has bullish implications for the weeks and/or months ahead.  While near-term momentum has grown overbought, there remain several stocks, which were mentioned above, such as CINF, MMC, AON, AIZ, which have not yet broken out and appear like good risk/rewards for long investors for the weeks ahead.  For now, this seems to be one of the bigger technical developments for Monday's trading which was a real positive.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

Healthcare woes persist, while fate of USD, TY yields depends on Jackson Hawkishness

August 26, 2016

S&P SEPT FUTURES (SPu6)
Contact: info@newtonadvisor.com

2175-6, 2165-6, 2160, 2139-41      Support
2190-1, 2200-2, 2208-10                Resistance


S&P Futures: (2-3 Days)  Neutral -  Similar to yesterday's write-up, I view Friday's possible course of action as a Coin-flip, with a slight negative bias for pullbacks sometime during the session.  However, meaningful weakness still appears unlikely, and that drawdowns should prove minor with support to buy down near 2165-7, with breaks of that leading quickly to early August lows in the S&P futures at 2141.50. To feel this minor pullback is behind us, September S&P futures require a close back up above 2188.  For Friday, this 2165-7 area is very important in Futures.

SX5E-Bullish, with targets near 3100-3150 into late August-  Nothing changed sufficiently with Thursday's minor pullback, which failed to even break down under Wednesday's lows, leaving the minor rally from late last week largely intact.   Rallies up to 3100 look likely.   Only bearish on move under 2890.

HSCEI- Bullish- Thursday's ability to hold up above Wednesday's lows and produce an "Inside day" should help prices start to turn back higher.  Area at 9340-50 should be support to buy, while any close back up OVER 9640 would mean the move back to 10,000 is back underway.


Longs/Shorts for a 3-5 day period:

Technical Longs: NFLX, GRUB, PAYC, LEN, PHM, PX, EA, FLR, YUM, TLT
Technical Shorts: NVDA, SHLD, LRCX, PH, CAVM, TER, TBT, TRIP, GOOGL



TECHNICAL THOUGHTS


Friday is unlikely to have much decisive price action until Yellen's speech is completely deciphered, despite the fact that it very well won't contain much that will give the market much of a clue.  Economic data really hasn't changed that significantly that would bolster the FOMCs chances of wanting to hike prematurely in an uncertain environment, and the Fed continues to seem more "Dow driven" than "data driven" of late.  

The inclusion of one overly hawkish word in today's market could cause a massive surge in the US Dollar and spike in Treasury yields, while the lack thereof would result in the Dollar likely giving up all the gains from the past couple days.  Moreover, precious metals, in a dovish or non-hawkish scenario, likely would bounce and recoup much of what has been lost in recent days, while Treasury yields would plummet back down towards lows.  In the event that Yellen chooses to stress the uncertainty, yields could very well violate the consolidation that's been in place since mid-July. 

Bottom line, much of Friday will depend on the Fed's interpretation of recent economic data and global stability and how Yellen chooses to phrase those opinions, which often are finely smoothed over in Greenspan fashion like s fine-toothed comb.   The Citigroup Economic Surprise index has weakened over the last month (Economic numbers have been worse than expectations), and still lies around the 0 level after nearly 16 months.   For global assets, the US Dollar index, and Treasury yields will need to be watched very carefully, and volatility in both of those could have big implications for the future course of Financials, energy and materials sectors, and Industrials.

The big disappointment of recent days has centered all around Healthcare, as in the last 12 trading hours, Small Cap Biotech went from the highest levels since January down to new multi-week lows, causing a huge pullback in the XLV, which is now lagging all other sectors on a one-week basis by more than 60- bps, and down over 2.25% in the rolling 5 days through 8/25/16.  (S&P Healthcare index)   Overall,
'

Some charts and additional comments below

 

 

S&P broke its pennant by a small amount Wednesday, yet failed to move down under the all-important 2165 level from 8/17 and this will be the important level to watch for Friday.  Under there on an hourly close is bearish, and right to position short with eyes on 2141, and stops on hourly closes back above 2165.   On the upside, its necessary for futures to climb back above and close above 2188 to have confidence that the worst is behind us.  Overall, downside seems limited and should produce a chance to buy with targets eventually up near 2215-20.

 

The huge reversal in Healthcare over the last couple days has broken down to the lowest levels since Spring on relative charts to the SPX and still looks to weaken further in the days ahead, despite getting stretched now to the downside.  This was a fairly robust reversal for Biotech at a time when it could have closed at new six-month + highs, so the next week will be important in seeing whether relative charts can recoup some of this damage.  Until they do, this sector is a laggard, and likely underperforms as Clinton's lead in presidential polls shows any signs of widening further.

 

Any non-event, or non-mention of a September hike and/or diminished expectations for hikes this year would cause the US Dollar to lose most of the ground its gained in recent days, and would fall back down to, and under recent lows.   The structure of the pullback thus far has taken the shape of a three wave move with possible fourth wave type consolidation in the last week.  Any additional weakness would likely extend to test and break June lows and potentially reach late April lows.  This in turn would help commodities bounce and help Precious metals regain their recent losses.  Conversely, breakouts of this downtrend for USD would be quite bullish for Growth vs Value and quite negative for precious metals.  If Gold breaches 1300 in such a scenario, little support is found until near 1200.   For now, the odds suggest a Dollar weakening and it's right to expect some backing and filling in the US Dollar index, barring any kind of hawkish rhetoric from Yellen.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

 

NASDAQ looks likely to weaken relative to SPX, & Semis could underperform

August 25, 2016

S&P SEPT FUTURES (SPu6)
Contact: info@newtonadvisor.com

2175-6, 2165-6, 2160, 2139-41      Support
2190-1, 2200-2, 2208-10              Resistance

 


S&P Futures: (2-3 Days)  Neutral with a possibility of near-term weakness down to 2165.  Wednesday's close down beneath the lows of the recent pennant could bring about additional 1-2 day decline to challenge 8/18 lows, but still not too much weakness thus far to justify a larger correction-  NASDAQ Comp has shown evidence that it could start to underperform, so this is primarily the impetus for thinking stocks might stall out and/or encounter near-term weakness. But still very much range-bound overall and the S&P should outperform vs the NASDAQ.

SX5E-Bullish, with targets near 3100-3150 into late August-  European Bank rally on Wednesday helped European stocks continue higher to multi-day highs.  Rallies up to 3100 look likely.   Only bearish on move under 2890.

HSCEI- Wednesday's decline below Monday's lows postpones the advance and suggests that HSCEI could experience another few days of weakness before turning back up- Area at 9340-50 should be support to buy, while any close back up OVER 9640 would mean the move back to 10,000 is back underway.


Longs/Shorts for a 3-5 day period:

Technical Longs: LEN, PHM, PX, EA, FLR, YUM, TLT
Technical Shorts: NVDA, LRCX, CAVM, TER, TBT, TRIP, GOOGL



TECHNICAL THOUGHTS


Wednesday's selling was the first bearish sign in the last couple weeks that S&P undercut the lows of the most recent pennant which had been formed since early August.  This could bring about a test of mid-August lows and is viewed as a short-term negative.   Breadth finished at a bit over 2/1 in "Down" vs "Up" stocks, while volume picked up to the highest levels of the week thus far.  While not much can be counted on in extending prior to Jackson Hole with no meaningful information as to the broader picture or the FOMC's timetable for possible hikes (which certainly would be downplayed on a selloff Thursday/Friday given past tendencies to overemphasize their "Dow Dependence" vs "Data Dependence")  there were several cycles which pointed to August 26 as having importance in possibly causing a change in trend from a cyclical perspective that can't be counted out thus far as occurring early.

A few things are concerning in the very near-term, which were largely absent last week: 
1) The NASDAQ Composite has shown a few signs that suggest this should now be topping relative to the S&P, and typically a concern and a leader in market movement, when the NASDAQ turns up or down prior to the SPX.   Wednesday's reversal occurred amidst a flurry of TD 13 signals from TD Sequential and TD Combo indicators on relative charts of NASDAQ Composite vs SPX, and the underperformance in Semiconductors and SOX index drop to new multi-day lows could have a near-term detrimental effect on Semi stocks and the Tech sector in general.

2) The Metals/Mining trade seems to have lost a lot of momentum in a very short period of time, as GDX broke down out of its trend channel while Gold showed signs of violating support.  Part of this is due to the attempted bounce in the US Dollar with little or no reason outside of wanting to "flatten out" ahead of Yellen's speech in Jackson Hole.   While this move might prove short-lived given the Dollar's ongoing downtrend and inconclusive proof of any rally, it's notable that this sector has moved so quickly to the downside in the last few days after a lengthy period of prior outperformance.

3) Healthcare has also quickly reversed on the controversy regarding the recent "Epi-pen" price hike that was accentuated by Hillary Clinton Wednesday afternoon.  Prior to the sector's about-face, Biotech's XBI etf had reached the highest level on a closing basis since January.  However, by days' end, XBI was right back at new weekly lows after a severe reversal with ENDP, MYL, MNK, VRTX all shedding more than 4% on the session after formerly being up more than 2%.

The positives have to do with Europe turning up sharply to multi-day highs on the SX5E, SXXP with European Banking stocks showing evidence on a one-day basis of making a breakout of the downtrend from last year.  This is certainly a positive, but if the FOMC downplays the economic strength or stocks experience any kind of weakness into Jackson Hole, the uncertainty might be emphasized more than "leaving a window open" for Hikes.   The breakout early in the week of Consumer Durables is also a positive that should be highlighted as a bullish factor, despite Wednesday's decline.
'

Some charts and additional comments below

 


NASDAQ's close at the lowest levels since 8/10 look to be helping this ratio of NASDAQ Composite to SPX to turn lower at a time when two separate counter-trend sell signals are suggesting possible exhaustion for the NASDAQ vs SPX.  Given that this turned higher and produced "buys" right at the lows in February and showed two prior indications of exhaustion both right within 2 days of prior peaks in April and also in early June, it's worth paying attention to.  In the days ahead, NASDAQ Composite should underperform the SPX, and technically it looks right to expect a relative correction in this ratio.  Thus the NASDAQ should be the index to avoid between the two between now and early September.

 

 

The reversal in Semiconductors Wednesday also presents a near-term bearish development for the group after its huge run-up since February and more recently since June.  The combination in this chart, similar to the NASDAQ/SPX, of a move to new multi-day low while counter-trend signals are abundant make Semis vulnerable to showing near-term weakness, and could underperform both Software and Hardware in the short run after a massive period of outperformance most of the year.  While additional selling might be required for some to avoid this group from a trend following perspective, there's sufficient evidence now from a counter-trend perspective to consider taking profits and avoiding in the near-term.  Trading sells for the SOX would be confirmed on a Thursday 8/25 close beneath 797.05, or Friday 8/26 close under 797.28.

 

A positive development surrounds the minor breakout of the STOXX Europe 600 Banks index Wednesday on its close above both early August highs along with the intermediate-term downtrend from last year made during mid-July.  Gains up to near 150-5 look possible for European banks in te short-run, but could prove short-lived heading into the month of September if Global bond yields remain subdued and move lower.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Consumer Durables Breakout helping to boost Discretionary relative strength

August 24, 2016

S&P SEPT FUTURES (SPu6)
Contact: info@newtonadvisor.com

2175-6, 2165-6, 2160, 2139-41      Support
2190-1, 2200-2, 2208-10                Resistance

 

 


S&P Futures: (2-3 Days)  Bullish-  Despite the late day pullback, S&P still managed to close at the highest levels since last Monday's 2190 in Cash index, with 2186 being important in the September Futures contract.  Movement up to challenge 2200 look likely ahead of this week's Jackson Hole conference, and for now, it remains premature to have any kind of bearish stance.  2172 can be used as a new stop for longs, with thoughts that 2200 is challenged in the days ahead.

SX5E-Bullish, with targets near 3100-3150 into late August-  Tuesday's positive close at the highest levels since last week suggest this minor pullback likely has run its course.  Rallies up to 3100 look likely.   Only bearish on move under 2890.

HSCEI- Bullish- Advance up to 10,000 looks likely in the days ahead.



Longs/Shorts for a 3-5 day period:

Technical Longs: LEN, PHM, PX, EA, FLR, PCLN, YUM, FLT, PXD, TLT
Technical Shorts: EEM, UUP, TBT, RCL, TRIP, GOOGL, MO



TECHNICAL THOUGHTS


S&P managed to give back just a fraction of early day gains, and by day's end, still managed to close up at the highest levels since last week.  Key developments focused on the breakout in Consumer Durables, led by Homebuilders following Tuesday's bullish New Home sales data, and Retail also outperformed given favorable movement in Best Buy, Office Depot, Signet Jewelers, Staples and others. 

Overall these bullish sub-sector moves helped Consumer Discretionary close at new multi-day highs, an important move given that this sector is the fourth largest within SPX at 12.29% weight.  Further relative strength looks likely in the days ahead which is important, and a likely positive force for stocks which should serve to keep prices afloat awhile longer, despite the increasingly choppy nature of this advance.

Tuesday also brought about a reversal in the early weakness in the Dollar, while WTI Crude also lifted from early lows and finished well up on the day.  This Dollar reversal led to a huge "outside" day in Emerging markets, which increasingly look to require some backing and filling after their run higher in July.  EEM has been lower five of the last six days, though still looks to have a bit of downside over the next couple days into Jackson Hole.  Given that the next large move in the Dollar still looks to be lower, one should consider covering any shorts in the days ahead, as a larger pullback in the Dollar could have bullish implications for Emerging markets.
'

Some charts and additional comments below

 


S&P's advance Tuesday was largely constructive, and despite a late-day pullback, prices never breached any areas of support that were important.  Movement back to new highs looks likely into Jackson Hold, with only a breach of 2172 postponing the rally.

 

 

Consumer Durables was one of the most important technical moves for Tuesday, as S&P 500 Consumer Durables index broke out to new all-time highs given the strength in both Homebuilders following Tuesday's bullish New Home Sales data along with Retailing.  This sector looks to continue higher, despite the near-term overbought conditions brought about by Tuesday's advance.  Long positions should be favored in Durables along with Consumer Discretionary in the short run, as both Retailing and Durables have helped this sector to show much better relative strength, despite the dismal Media and Autos serving as a minor drag.

 

 

As mentioned, Homebuilders served as one of Tuesday's best performing sub-groups with stocks like Lennar, Pulte Homes and Toll Brothers all returning more than 3% on the day. ITB, the ETF for Home Construction, bottomed right where it needed to above $28 and moved up sharply to new multi-day highs on Tuesday, something which has followed the breakout in Lumber above its multi-year downtrend which was first made back in May.  Additional outperformance looks likely.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Dollar remains vulnerable to further weakness; US Equities recoup early losses

August 23, 2016

S&P SEPT FUTURES (SPu6)
Contact: info@newtonadvisor.com

2175-6, 2165-6, 2160, 2139-41      Support
2190-1, 2200-2, 2208-10                Resistance

 


S&P Futures: (2-3 Days)  Bullish-  Monday marked the fourth straight day that prices rallied well up off early lows.  Movement up to challenge last Monday's 2186 close (2190.75 High) looks likely in the next few days with larger targets near 2210-2220 possible before this rally stalls out in greater fashion.  To reiterate former areas of importance, unless 2167 is breached on a close, it's right to buy dips and expect 2189-91 to be tested and taken out in the days ahead.

SX5E-Bullish, with targets near 3100-3150 into late August-  Similar to last week's thoughts, the pullback in SX5E really hasn't done much technical damage.  Recent weakness should represent chances to buy dips with thoughts that 3100 and then 3150 can be tested in the weeks ahead prior to any real top.  Only bearish on move under 2890.

HSCEI- Bullish- Inclined to think pullback has nearly run its course here, and like owning here and buying any further decline into 9500 for a move up over 10,000.


Longs/Shorts for a 3-5 day period:

Technical Longs: PX, EA, FLR, QCOM, PCLN, YUM, CHK, FLT, APD, PXD
Technical Shorts: RCL, TRIP, GOOGL,  PM, MO, COH



TECHNICAL THOUGHTS


Similar to prior days in the last week, European indices closed mixed to lower in Monday's session, while the SPX managed to claw its way all the back to near positive territory by the close.  This now represents four straight sessions where prices have successfully bounced hard off early lows to close at or near positive territory.  A move higher to test last Monday's highs looks likely in the days ahead, or 2190, and fading US Stocks here continues to look premature. 

Bond yields have begun to turn down with a bit more force of late while the US Dollar looks to be having difficulty in holding gains, as evidenced by Monday's close well down off its highs of the session.  Crude fell nearly 4% on the day, which caused Energy to underperform all other nine major Sectors in the S&P GICS Level 1 category.    Overall, not much true change based on Monday's session, but some evidence of Emerging markets starting to wane a bit while Crude oil corrects its near-term overbought state.

Overall, both stock and bond markets continue to churn, with little or no sign of any real trend since mid-July. Rallies in both stocks and bonds look likely in the next couple weeks, and any breakdown of consolidation lows for Treasury yields very well could coincide with Financials starting to weaken again, which might stymie any rally efforts.  For now, it pays to be bullish, until some type of real proof is at hand.  

Some charts and additional comments below

 


Emerging markets have begun to show mild evidence of rolling over, as Monday's EEM close was the lowest since August 8, nearly three weeks ago.  Additional pullbacks look likely on a 1-2 day basis, while evidence of the US Dollar index breaking down again could likely help EEM stabilize and begin to show signs of moving back to recent highs.

WTI Crude's near 4% loss in trading Monday looks to have another 1-2 days of weakness, but should take the form of the minor correction into mid-August which proved brief before moving back to new highs.  Areas to buy dips lie just below $46 and should be considered good support on pullbacks.

 

Bond yield curves have begun to break down a bit more severely in recent days, with 10s/30s and 2s/10s hitting new closing lows for the year.  Additional flattening looks likely as a result of recent closes under the lows of this bearish technical pattern, and would expect that both 10s and 30 yr yields pullback to take out recent lows.  This would suggest that TLT could work well for longs, and/or TBT for shorts.

 

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.