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Trading

Tuesday's lows Remain the line in the sand for Equities

Trends remain intact despite todays selling- not damaging for now..-  TUESDAYS lows will remain the key Line in the Sand for this rally and UNDER starts the acceleration.-2789 SPX, and under 7292 problematic for NDX-  But until that happens.  The trends are still ok-   Expect to see some real disjointed behavior though into next week, as Financials up near key levels and stalling.. While FANG stocks have lagged since mid-June-  Defensive issues meanwhile have outperformed over last month.. And Breadth remains UNDER levels seen in mid-June.. So with DJIA trying to break and still UNDER June highs.. We have quite a few moving pieces and anything but a broadbased market right now- Treasury yields have reversed sharply lower from earlier yield highs and at 2.842 have formed Bearish engulfing. And should allow for yields to pullback to 2.76.  Dollar higher but showing evidence of stalling and should be close to peak.  Gold getting close to lows and downside minimal to 1200 and would buy into further weakness early next week in Precious metals-   For Equity sectors to consider-  Retail, as mentioned in early am piece.. Is the sector to overweight-near-term.. And stocks like FIVE, ETSY, TJX, M, BURL, DSW, URBN.. Are all longs on a 3-5 day basis

Best trading day in 3 weeks, to help Month, Quarter end on good note

Markets still trading in upper quartile of today's range despite a fractional Give-back-  Set to have the best trading day of the pats 3 weeks to end the month and quarter on a moderately bullish note, despite this being a DOWN week-   Defensive issues have outperformed this week, and S&P's move today breaks the mild downtrend from 6/21 which is a positive in the near-term heading into 2H and the month of July-  All 11 sectors are in positive territory today, being led by Energy, Industrials, and Materials, and evidence of the US Dollar turning down a bit more forcibly is helping the Metals and EM to stage a bounce-   Overall, Additional near-term progress looks likely into early July..  And S&P 2747 will remain an area that needs to be surpassed to give conviction of a larger rally-  but some minor reasons for optimism over the next week given today's stabilization in Industrials, materials and some good progress in recent weeks in many healthcare names starting to rebound-  Financials and Tech will be a work in progress after their recent pullbacks, so difficult to have too much conviction there just yet.  But signs of fear having increased a bit in recent days was encouraging to try to buy dips from mid-June, thinking that the recent cyclical botttom that's occurred over the last few months might happen yet again this month, leading higher into the new month.    FAVOR Industrials, Transports, healthcare, Gold, silver, EM, EURUSD.. But the patterns in USDJPY, USDCHF arguably aren't too negative.. And Canadian Dollar's larger breakdown in recent weeks looks important vs USD-

Gold stocks showing nice bounce and above 22.75 should begin an even larger rally

Gold stocks showing nice bounce and above 22.75 should begin an even larger rally

Breadth and TY Yield Non-confirmation gave sufficient early clues today

Not an encouraging effort as early breakout attempts failed, making an UPSIDE DOWN V shaped severe pullback to near key 2700-5 lows of this recent pattern.  Bond yields were the initial culprit, and the breakdown in Yields resulted in Financials following suit, while Technology also weakened, with Semis providing the non-confirmation there, with a failure to also make any meaningful headway.  Breadth had lagged during the entire am on rallies,  but went from 3/2 positive, down to -2.5/1 negative by the close.  while Energy was a Safe haven, it was just tough trusting the initial pop in Industrials with the rest of the market not really paying attention.  Overall, the wave structure seems to suggest a final pullback into end of month, and with Fear gauges now rising and evidence of hourly positive divergence, this pullback very well could end like others have this year, bottoming out in the next 3-5 days to start the new month and Quarter, and a mild rally attempt into and slightly beyond the holiday before selling pressure again come mid-month.  We'll simply need to see some evidence of more sectors starting to stabilize to have much confidence in stocks here.  Industrials, Transports both look close, as do Materials, while Technology and Financials still look like a source of weakness between now and end of week-  Gold meanwhile has arrived at nearly the perfect area of trading support, and is now interesting again to buy dips after this 7% 100 point pullback from the recent highs.  One should look here near 1240-55 in the next 2-3 days for possible signs of this pullback holding and turning back higher.  

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Bond yields not following Stock breakout attempt a warning, while Tech also quite weak

S&P got to 2747.. Now backed down to near unchanged.  Yields never led/and/or Followed stocks higher on the bounce and the breadth has been very marginally positive at best-  Financials weak and this continues to be an area to short into and avoid while attempting to buy dips in Industrials-  KRE has BROKEN yesterday's lows and mid-May lows along with entire uptrend from last Sept. KBE also extending lower after trend break-  while XOP and OIH have surged this am.  So a very difficult tape with many moving parts-  Right to be long Energy-XOP, OIH and Industrials-XLI, Healthcare- XLV.. But short or avoid Financials, XLF/KBE/KRE and also short TECHNOLOGY-  XLK

KRE has violated trend similar to KBE a few days ago-  Additional weakness likely

KRE has violated trend similar to KBE a few days ago-  Additional weakness likely

Stabilization in Industrials, Materials a positive, but KBE breakdown is NOT

Just after mid-day, S&P getting up to what will be its first important area on this bounce-  2735 up to 2737 for this afternoon-   Above 2737 would be a meaningful development that leads to 2747-  Breadth thus far pretty lackluster at 2/1.. And while Tech is snapping back and Energy to a minor extent.  Financials are not. And we're seeing BREAKDOWNS of the minor trend for KBE with KRE on the verge-  WTI $2 gains are much more impresssive than what we're seeing in OIH.. Or XLE for that matter. And it pays to be long in XOP if you're going to play this group.  But todays move is largley the laggards.   CXO, EOG, XEC.. So while Energy is up 1%. Its misleading, as HAL is lower on the day-   but XLI, XLB and XLF have all shown DAILY exhasution in the last 24 hours.. With TRAN on deck by Wed potentailly.  So these parts of the market do look to be stabilizing (not as much Financials) but the trend in Tech clearly looks much worse and this bounce near-term.. 24-48 hours, likely something to sell into-   Gold close to turning back higher after getting down to 1240-55 zone of support.  As per S&P. As mentioned earlier.  Trend will be negative until/unless 2747 exceeded,  so this first bounce should be nearing important levels

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Discretionary/Retail & Healthcare powering move, while Financials, SOX lag

A bit more than 2 hrs remaining.. US equities continuing to hold earlier gains- Breadth is VERY meager.. But the positive price strength is importnat for now-   Getting closer to areas of importance, but ahead of Summit and FOMC, still early to take profits and sell and Technical trends still support a bit more strength-  Note the degree that Discretionary (think, Retail) and Healthcare are showing good relative strength today, XLY back at new highs and still right to overweight and be long into Thursday-  energy has snapped back with WTI bouncing a bit.. And necessary for a bit more selectivity in this sector.  Financials flat.. Regionals- KRE down over 1% and KBE also lower.. So the group is barely postive .. And SOX also lower today within Tech.. So just minimal progress in Tech and Financials and this rotation is important to see-  For now, do NOT expect that S&P and DJIA can make it back to new highs without stalling.. But that a bit more yield strength happens over the next couple days which should set up for Treasury longs- For a 2-3 day basis.. Its right to press Discretionary and Healthcare longs.. While largely avoiding TECH.. And being much more selective in Financials-  Dollar weakness continuing early in the week.  Mild bounce in commodities  and Silver up by 1%.. But these will start to gain speed once yields peak out-   Let me know if you have any questions

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5 Key Trends to watch heading into the 2 Summits

5 Distinct trends heading into these 2 Summits..   1) Dollar has been weakening over last week, giving rise to bounce in Metals/Chemicals/Ag stocks  - Materials is a Technical overweight-   2) Technology showing increasing signs of stalling out-  SMH is a short into end of June-   STX, LRCX also ones to consider shorting-  Semis should UNDERPERFORM Hardware  3) Yield bounce in the past week has given rise to Financials snapping back- Fins up 1.7% for the week, outperforming and could still into next weeks FOMC  4) Breadth has rebounded.   68% of stocks above their 50-day, up from the mid-50s 2 months ago.. Advance/Decline at new highs.. And XLB, XLV have both broken out this week..  Materials, healthcare..  5) DJIA has rebounded this past week and showing much better strength-  Remember this was a distinct laggard as NASDAQ moved to new highs and SPX, DJIA lagged.  Now DJIA has rebounded, thanks to snapbacks in MCD, HD, DWDP, DIS, PG, BA, all up more than 3% this past week-

Materials has made excellent headway this week, and is a TECHNICAL OVERWEIGHT

Materials has made excellent headway this week, and is a TECHNICAL OVERWEIGHT

Mid-day Technical Thoughts- NASDAQ moving back to new all-time highs

Just past mid-day.  NASDAQ set to make new all-time high daily close today as FANG index breaking back out to new highs- Bonds have sold off with yields backing up again and TNX to 2.92%-  XLF due to confirm COUNTERTREND BUY Signals by today's close using Demark indicators, and should bounce into end of week/early next week- Emerging mkts bouncing- EEM and outperforming today, and expect this might continue this week as Dollar starts to pullback-  Crude weakening further and Energy underperforming ..  Tech leading all sectors. and just 3 sectors down-  Energy, Industrials and Utilities-  Overall,  2749-50 impt for S&P FUT, and above could allow for quick move to 2760-7 which could mark an area to sell-   For now, Trends positive into FOMC mid-month-  Breadth not too inspiring today.. Just around 3/2 bullish but right to stay bullish given Financials showing some evidence that this group can snapback as Tech moves back to new highs

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Market has recouped half of early Pullback- GRAINS breaking out

Market has recouped about half of what it lost after Summit cancellation-  S&P still lower by 0.30%.  Breadth fractionally negative..  Financials and Energy the biggest laggards, both down -1%, while Industrials moderately positive and Transports up by 1%.  Utes, Telecom also making headway and Discretionary flat-  Bigger moves today out of Bond yields lower, w/ TNX undercutting 3% and down to 2.97%.. While Dollar gradually peaking  and Gold pressing up to 1310- Also important to note- the GRAINS have been pressing higher aggressively with Breakouts today in Wheat and also quite constructive price behavior out of Corn-  Beans the laggard, but all three should still be able to make upward progress into early June before seasonal weakness-   Attractive longs to buy here:  WEAT (Wheat ETF), ODFL, MRK, GRUB, COST, DHR, WY, PGR, MPC, BAX

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Fractional gains, but Financials still not participating, and PUT/CALL plunging

Indices up fractionally this am.   But breadth is disappointing again and most of this rally has been Energy and a few select Industrials names.  ON the plus side.  XLI looks to be breaking out above its downtrend.   However, on the flip side.. Financials is NOT participating.. nor is Technology to a large degree, so over 1/3 of the market.  Yields continuing to press higher.  And TNX now at 3.11 while commodities have stalled.  CRUDE still showing good upside progress.. while the metals have not worked since yields and the USD turned up aggressively.  As we near mid-day.  Energy the only sector up more than 1%.. while UTILITIES, REITS and TELECOM all lower, as might be expected with yields rising.    Today’s best SPX performers in VLO, M, MPC, ANDV, HAL, EOG, ESRX, DVN, PSX, CXO.. so 8 of the top 10 are energy.  While on the downside-  WYN, CSCO, IDXX, DISCA, PGR, MU, SCG.. a very mixed picture, with a blend of some Tech, Utilities and Discretionary names.     2741 will have importance for markets… but it still appears doubtful that largecaps and NDX can press higher to join the Small cap breakout we’ve seen..

 

 

Is it REALLY safe to Sell a breach of the 200-day? Sometimes yes.. sometimes No

Today's snapback higher put "egg on the faces" of those who used the break of the 200-day moving average(m.a.) to sell stocks yesterday, and as we've discussed, the SLOPE and/or how much an asset is above or below a 200-day m.a. means far more than simply "touching" a moving average in of itself for purposes of attempting to find support.  While this can occasionally work, i..e Feb 18, and/or Nov 16, there are other times when it turns into a miserable failure such as Oct 14, while most of 2015 saw price ebb and flow above and below the 200-day ma all year long with no apparent rhyme or reason. Utilizing Price and time analysis is truly the key to trying to find tops and bottoms, & one should utilize Fibonacci analysis in a similar fashion.  Those who simply attempt to buy stocks based on a touch of a level like this will find inconsistent results at best.   Our morning note talked about the reason for covering shorts into 4/2 close, which had to do with near-term oversold conditions, positive momentum divergence, signs of fear coming back into the market, and capitulatory signs of volume, as we saw the 2nd straight 90% Down day and a huge TRIN reading of 2.5+.  Demark indicators were also important in thinking we were close- For more info and daily/weekly Technical thoughts, visit http://newtonadvisor.com

 

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Encouraging Gains on good breadth, but near-term challenges into early April

Despite what seemed like a very strong day price-wise, S&P failed to take out areas of importance which would have turned the trend bullish.  The move over yesterdays’ highs did in fact allow for early day acceleration, and S&P got up to 2659 before reversing nearly 20 handles into the close to finish right near former highs from Wednesday.  Breadth finished at a respectable 4/1 bullish, while 6 sectors finished up over 1% and all sectors were GREEN except Real Estate. 

OVERALL,  its TOUGH to enter the month of APRIL BULLISH just yet..  as near-term momentum became overbought on hourly charts.. while Daily and weekly momentum are NEGATIVELY SLOPED, while the market (S&P) also still lies in a downtrend from 3/13 highs.  There has been no trend breakout and most short-term cycles pinpoint April 3-6 for a change in trend, which I believe should be a LOW, followed by a move higher in the subsequent weeks throughout April into May-

However, the fact that prices rose as much as they did helped to turn momentum UP on 240 min charts..  which means that any “backing and filling” likely could create the kind of positive divergence in momentum that will allow for a low to be formed next week.   The Alternate scenario is S&P simply presses up above 2660 and its off to the races.. which I doubt is the case.. but cannot be ruled out completely.   The factors of near-term bearish sentiment back in the market (AAII- more bears than bulls), and bullish seasonality for April, coupled with Short-term oversold conditions into this week while the larger weekly trends remain intact.. all these are positives which suggest buying dips.   The negatives of the huge momentum and breadth drawdown from late January are definitely concerns.. but until Feb lows are broken, it looks right to take a stab at thinking stocks move higher in April.  However, this will require some evidence of breaking out of the downtrend at hand which is near 2660 and getting up above Tuesday’s highs at 2680 would help add conviction.  Until that happens, the odds on favorite is for an early week retest of lows yet again, but which this time around, should be buyable.  One should keep stops tight near Thursday’s highs, but not wrong to have a few shorts after Thursday’s move.. (IWM QQQ) and expect some consolidation early next week before lows are in.

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Market slipping as yet another retest of late February highs looks to have held

Just past 130..Tillerson due to make comments at 2pm-   Europe closed near the days lows about an hour ago with most indices lower by 1%..   US has managed to snap back a bit in both DJIA and also S&P, while NASDAQ has underperformed for most of the day .. Breadth remains mixed.. While Volume a bit heavier in DOWN stocks vs UP-  Both Technology and Financials down today.. Which at 40+% of S&P, is important.. But Energy far and away the worst performing sector.. Lower by -.44% and Utilities also ddropping despite Bond yields lower-   ON the flip side.. Healthcare has gained 0.50% today the best performing group, while industrials also showing 0.25% gains with Transports a notable positive , higher by more than 1%.. And since the beginning of March with the Airlines a notable outperformer in the last couple weeks-  The Dollar's decline also looks important for today.. with meaningful weakness vs Euro and Pound Sterling and Canadian Dollar.. This has helped to jumpstart some of the lagging metals in the last week, and a good bump in many of these stocks that had been hard hit in the last week as Dollar and Yields rose.. such as NEM, ALB, SEE, FCX, VMC TECK.. Overall for S&P, prices have managed to temporraily regain yesterday's 2783 lows after early weakness..  But still overall a negative day after giving up all earlier early am gains.. And upside looks limited both price and time wise for the balance of this week.  UNDER 2740 necessary to have any sort of conviction for a larger pullback getting underway-

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Dollar downturn causing Metals to surge

Just past 130, NASDAQ holding earlier gains, up 0.50%, while both S&P and DJIA higher by 0.20-.30%.  Small-caps and Transports both outperforming today.  Breadth only a tad over 2/1 positive, not great, but volume even up less.. Around 3/2 into Advancing v Declining shares-  Yields largely unchanged.. Though higher abroad.. And US Dollar making sharp decline lower which is helping Metals stocks today, while both Silver and Gold turn higher -  Materials the best performing sector up 1.72% while Industirals up .50% and only 3 down sectors led by Utilties, lower by nearly 1% while Discretionary and Healthcare both down 0.25%.  -  Early pullback attempt in S&P held at 2710 and proved to be a good buying oppty while upside resistance occurred at 2725 and still an area of interest if hit this afternoon-   Market trend remains resilient over last couple days  but bigger development today concerns the Downturn in USD and what might be in store for commodities-  Within Healthcare, MYL, ILMN, GILD, WAT, UHS all higher by 1-4%,  while on downside- VRTX, BMY, ABBV, ALXN, HOLX, CNC, UNH, PDCO, JNJ, REGN all of which are DOWN 1% or more.  Let me know if you have questions

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A Much different equity market than a few months ago.

Certainly a MUCH different Equity market these days than a few months ago.. and we've seen evidence of the sharp pullback now into mid-Feb which is struggling to make headway back higher and regain 61% of prior decline-  Transports meanwhile are not keeping up, and Technology, despite some near-term progress, has waned a bit also_  Breadth on this bounce has been far weaker than the decline and we still have less than 50% of all SPX stocks above their 50-day ma.   Tech has helped to buoy prices thus far, but how long can this last if others cannot participate?  Sentiment seems to have jumped far too much on this minor bounce, while momentum remains negative on weekly charts after one of the largest pullbacks from Overbought territory ever seen, with weekly RSI plunging from 90 down to 50.   Any subsequent rally back to highs will likely NOT see momentum equal this prior peak, thus setting the stage for the negative divergence and subsequent breadth dropoff which typically precedes larger declines in the Summer/Fall-  At present.. trends from last August have been recaptured..  but it pays to be very selective here and counter-trend signs of exhaustion on Semis/SOX/TECH will arrive by end of week-

Tech serving as lone source of strength in a market of many moving parts

Market still in consolidation mode and except for Technology.  Not much working- Breadth down around 3/2 negative and only Tech and DIscretionary positive while the other 9 sectors all lower with Staples, Utilities and Telecom all being hard hit-  10yr has risen up to 2.90.. But 2 yr rising more quickly and yield curve flattening out again down to .67 bps.  Dollar bounce also continuing and could have another 1-2 days left.. So Precious metals pulling back-   Overall, the Transport weakness remains a short-term concern, but for now, this Market weakness looks to not lead lower too dramatically as long as Tech can outperform.  SOX charts indeed show the next couple days to likely be higher. So like overweighting TECH this week while still being more selective elsewhere-   Metals should be bought on weakness, though as TNX chart closing in on meaningful resistance while DXY rise also nearing completion, technically and an important area where this stalls out and turns back lower.  So for now, SOX can likely hold market up

Tough to make too much of bounce just yet

Equities got all the way down to 2613 in S&P Futures before bouncing, but we’re still seeing breadth of 5/1 negative.. and volume is not as tilted to the downside.. so to argue a low is at hand, it should be good to see that capitulation in volume like what happened on Monday when TRIN got to 3.60 and fewer stocks hitting new lows. Overall, it’s tough to make too much of this bounce in the last half hour and S&P would need to get back over 2687, the highs from earlier.   Yields have pressed higher again, while the USD has stalled out on its gains and now flat on the day.  Precious metals higher on the day but will need rates to stall out and turn down to have a bigger rally.   At present, we see Industrials and Financials down over 2%, and only Utilities positive, but still no real signs of fear.    Fear important in putting in lows, and tough to see meaningful bounce when many haven’t capitulated and started to buy puts.

 

Pullbacks have support at ES-2613 for the balance of the day.   But under that would allow for either 2701.. or under would bring about a retest of Mondays lows.

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Indices higher, yet breadth tilted negative, with More Declining issues

2 hours left. We see S&P still up 0.70%.. But Decliners are outweighing advancing issues.  Breadth is actually DOWN on this rally today.   Volume is spread around 2/1 positive which is giving the ARMS index a reading of .48. Very low.   Sectorwise, Tech regaining some of the decline in the last couple days, while the surge in Healthcare continues.  Only Utilities and Real estate are down.. But Utilities are outpacing Technology for the week.. At +1.69% vs 1.56% for Tech.. And Telecom has been this week's top performer-   The dollar's decline continuing today.. While yields have been scaling back higher.. So a move to 2.68-2.70% looks likely for 10yr yields and that could coincide with a yield peak as well as Stock peak early next week..  For now..  The key takeways are that this week's Transport and SOX declines should be tough to regain in just 1 day as these both broke important uptrends.  Breadth is now slumping and something to take seriously.   VIX meanwhile , down only 2%.. A far cry from normal times when a 0.75-1% rally would bring a huge decline in VIX.. So today holding up very very well-  OVerall today's stats paint a far less rosy picture than one would guess by just looking at price alone

The Times.. they are a Chan-gin..

Definite signs of things changing in the market..  we’ve seen two straight days of reversal attempts now.  Yesterday held up and went higher. While today thus far is well off earlier highs, with big earnings stocks like CAT getting down below key support which if closes here.. would be a negative for this stock.    Sector-wise.  Consumer Staples outperformed last week, while this week, Real estate, Telecom and Staples yet again are outperforming, with technical signs of Utilities starting to stabilize and not moving back lower, despite rates moving up.     Technology and Industrials meanwhile have begun to pullback.. with breakdowns in the Transports and Bullish sentiment has begun to approach levels seen near the prior peaks in 07 and 00 and after years of bearishness.. the ebullience now seems very different than the last couple years..  Whether this is just the BEGINNING of the move from bearishness to bullishness seems doubtful, but the momentum surge has indeed been powerful and its been a difficult trend to try to fight.   However, breadth during this recent surge in January has been lackluster and implied volatility has held up quite well.   The VIX has been coiling and technically looks constructive to think a big move is approaching.   A couple of different cycles suggest some kind of change of trend could occur in stocks between now and 1/29,  but it’s been tough to pound the table on this given how bullish the trend has been.  So we’ll need to see the actual reversal itself, and for now that requires a move down under 2825.  Meanwhile the Euro continuing to press higher vs the US Dollar while rates have begun to tick up and press up to new highs.    Demark wise.  The S&P and Treasury yields are close to signaling at least daily signs of exhaustion.  So we’ll see if yields get to 2.70 and reverse back lower  and whether this recent weakness in Semis and Industrials persists..  But this kind of movement after a big uptrend is generally a worrisome sign given how hugely bullish the public is.. and many have difficulty finding reasons why one wouldn’t be in stocks.. given better than expected earnings, Fed rate hikes growing nearly to be a certainty in March, geopolitical risks having died down.. while most of DAVOS has sounded very very optimistic.  So no obvious roadblocks to further gains.. which is precisely the time to pay attention.  For now.  Trends intact.  But watching carefully. 

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