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Transports pushing to new highs a positive force given the withering in Technology

September 11, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
286.5, 283, 281    Support
290.45, 291.16-19         Resistance


LINK TO TECHNICAL WEBINAR from Wednesday, 9/5:  https://www.youtube.com/watch?v=WwyKpRK1hR4&feature=youtu.be

 

SPX - (3-5 Days)- Mildly bullish with stops and turning short again under 2865--It's thought that Tech stabilizing along with Industrials and Transports extending gains are minor bullish factors for the next couple days.  Any reversal and pullback underFriday/Monday lows puts the bearish case back on the front burner for immediate pullback to 2800-7, but its thought that selling proves mild for now.  

SX5E- EuroSTOXX 50- Minor bounce possible but should NOT get above 3350, so 40 points maximum before this turns down again.   Wave structure should result in additional weakness to take out lows in SX5E.  Underperformance still likely.

HSCEI- Mildly Bearish-  Pullback looks to have another 1-2 days before finding support near-term, with max weakness likely taking this to 10200 before rebounding.  Look to cover shorts under 10250 on weakness into Tuesday/Wednesday


Trading Longs: CCE, KSU, CSX, URI, LB, TOWR, SQ, SAIL, PS, D, NEP, EXC, NRG, ES, ETR

Trading Shorts:  VMC, TWTR, AMZN, MLM, NTES, BF/B, JD, ANTM, AMBA


TECHNICAL THOUGHTS

US Equities selling has been largely unconvincing lately, and despite some rotation out of Technology, we're still not seeing weakness in Industrials, nor in Financials, with Transports having extended after breaking back out to new high territory.  While this splintered market might show a few days of rally attempts, largely driven by the Rails, it's unlikely that Tech can muster much strength, and this latter group remains one to avoid, outside of a few selective names within Enterprise Software.   

Technically one can make the case that Transports continue higher in the next few days given the recent breakout, and the pattern in XLI also looks more bullish than bearish near-term.  While Demark weekly sells are now present on XLI, the larger pattern still merits sticking with it, from the long side, until more evidence of weakness appears.   The Dollar along with Treasury yields and commodities have not shown much evidence of volatlity in the last 24-48 hours, so it's right to stick with what's working for the next couple days, that being Industrials and Transports, and stocks like KSU, CSX, URI, TXT, LII, ENS, AMR, ROP and EMR. 

ACTION PLAN-  

Short XLK at 75.75, with targets near 72.50- Take profits on daily close above 74.67
Long IYT- with targets at 212
Long XRT with target at 54
Long XLU with targets at 55
Long XLP with targets 55, Stop at 53.98

 

Additional charts and thoughts below.

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XLI still looks to push higher in the days ahead after yesterday's outperformance.  240 minute charts showing four-hour bar charts for XLI look to extend to targets over 79 before any real exhaustion, which still looks premature on intra-day charts.  Any test of highs from late January/early February would be an area to take profits, but might be difficult in September given the degree that momentum has turned down in other sectors.  

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Transports look to be one of the stronger areas in the market in the short run, given rallies in the Rails and The DJ Transportation Avg has managed to extend its recent breakout to new highs and should be favored for further near-term outperformance in the days ahead.  Overall, a move to 11700 looks likely before any real stalling out, and IYT could be bought technically for further gains near-term.  

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AAPL looks to be finally showing some evidence of backing off, at exactly the same time we're seeing selling in other former leaders like FB, NFLX, AMZN and others.   Many didn't expect that Equities would be able to hold up given a decline in many of the stocks that had carried this rally most of the way this year.   For now, the rotation into Industrials and Financials looks important and has been able to hold indices up despite the decline in Technology.  Near-term, this is a positive, but on any evidence of these other groups giving way, one would expect signs of markets showing further weakness in this seasonally tough month.  AAPL looks to pullback to 205-210 into end of September, so any near-term rally likely will not mark any meaningful low near-term for AAPL, which pulled back to multi-day lows yesterday and shows little evidence of any exhaustion after its recent move.