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Early weakness looks to have been contained- 2612, 2596 key on downside

January 28, 2019

Mark Newton CMT, Newton Advisors, LLC


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Bottom line: Trend will be bullish until/unless 2596 broken on a close- It's thought that today's early drawdown is creating a possible Triangle pattern and might hold and churn before making a final push higher to new weekly highs. Under 22596 would suggest that selling likely has begun and one should hold off on buying dips, and consider hedging for the possibility of a deeper retest into February.

For now, early day weakness thus far has been contained, and after S&P got down to near last Friday's lows, Breadth on today's decline has improved to just about a 3/2 negative. Technology is still leading all sectors to the downside at -1.5% negative, while Healthcare, Industrials and Energy are also down more than 1%. Real estate and Staples are positive and Financials has given up just a minor -0.33% on the session.

Overall, while the news out of CAT and NVDA seemed fairly bearish right on the open, the action in the broader market doesn't seem too negative thus far, and needs to show more to indicate any sort of pullback is underway. One should consider the REIT sector, and also select Financial names while groups like Industrials and Healthcare could pullback a bit more this week.