November 12, 2018
Mark Newton CMT, Newton Advisors, LLC
Monday mid-day Video- Click the link directly Below
Trend bearish UNDER 2764, and Bullish OVER.
S&P violated 2764 early on, turning the trend more negative, and now 2755 was also violated near the gap from last week's 11/6- Overall, this suggests a full retest of 2709-11 is likely before any real turn back higher, in my view. Minor rallies should be used to lighten up for a further pullback into today's close and the days ahead. Failure to recoup any of these losses tomorrow would allow for potential weakness into key cycle date 11/16 before any rebound. Breadth is down "only" around 2/1 negative, but far more volume is starting to flow into Down vs Up stocks, something which eventually (once the ARMS index gets above 2) should lead to fear finally coming back into the markets.
In recent hours, there seems to be far more discomfort with the market than has been the case initially in late October and this is slowly but surely causing sentiment to become MORE negative. However, we don't seem to be at "fear" just yet, and this looks to still take some time.
Specifically, i would note the NASDAQ extending its breakdown vs SPX in relative terms. This is a negative for thinking that stocks should bounce right away, given the Technology and Biotech weakness making up the NASDAQ. Seven sectors out of 11 today are down more than 1%, with Technology down nearly 3%. Given its 20% weighting in SPX, it's difficult for other sectors to pick up the slack.
SPX- HOURLY Chart-
S&P hourly shows the break of the trend from late October and now Friday's lows being violated. This latter point is a negative structurally and argues for a deeper retracement down to test the 50% level of our rally from 10/29 which hits at 2709. Under this level, it's likely that stocks test 2600 from late October before any low is in place.
NASDAQ vs SPX broke down last Friday and has extended this break in today's selling. This goes a long ways towards showing why no immediate snapback is likely given this breakdown given the importance of Technology to the US Equity market. Until there is evidence of downside exhaustion, and/or this chart moving back up to recapture the area of the break, this should weaken more and is a negative for stocks.