December 3, 2018
Mark Newton CMT, Newton Advisors, LLC
VIDEOS- Monday Technical Video: CLICK BELOW
Will be back at NASDAQ tomorrow, Tuesday 12/4/18 for Fast Money program at 5:20
BOTTOM LINE: BULLET FORM
Stocks rallying on 2.5/1 Positive breadth and despite intra-day pullback, trend and momentum have improved further on today's 1% surge- 2815 important for SPX
Global risk-on rally has helped both Europe and Asia to participate, with Asia's Hang Seng China Enterprise index, breaking out of a trend which has lasted most of 2018
WTI & Brent Crude gaining 4% on Saudi/Russian pact & technically should advance to high $50's given today's move
Flight out of Defensives looks to be taking place with Consumer Staples lower by -0.60% while Real Estate and Telecom also lower and Utilities underperforming
Financials underperforming as Yield curve has dropped further to 15.65 bps in 2/10's curve, while 5/10's has dropped under 15 bps - Early gains in US 10-Year Treasury yields did not last and Treasuries are rallying with TNX down to 2.988%
SPX- DAILY Chart-
S&P daily chart shows strong overhead resistance near 2815 which marked both November and August highs for SPX, but trends have grown more positive as a result of today's follow-through. Thus, the intra-day pullback doesn't appear too damaging near-term, and Monday's gains likely should prove to be the start of the so-called "Santa Rally" as Energy, Industrials, Discretionary, Technology and Materials are all up more than 1% on the day. For now, the key area for resistance remains at 2815, and the ability to exceed this would result in more confidence in this rally extending immediately this month.
US 10-Year Treasuries have failed to show much weakness to follow suit on the recent equity rally and the positive correlation between stocks and bonds has persisted in recent days. As we pointed out last week, we had seen exactly the opposite from early October as bond yields and stocks had moved in tandem, and it appears that the Trade war truce has resulted in the 2/10 yield curve pulling back sharply to new lows for 2018. This is having a detrimental effect on Financials today which are underperforming, and additional downward pressure in yields looks likely technically as a result of today.