April 23, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2900-2, 2892-3, 2872-7
Resistance: 2915-7, 2923-5, 2945-9
Monday Technical Video 4/22/19 highlighting SPX, Oil, VNQ
Thursday Technical Webinar Link - 4/11/19
My CNBC Interview on Disney and why shares are attractive 4/11/19
SPX - (3-5 Days)- Bullish barring a close under 2877. Upside target 2945-50
EuroSTOXX 50- Bullish- Upside targets at 3600
HSCEI- Neutral- Some signs of stalling, but trend won't turn bearish until 11553 is violated
Trading Longs: HES, WHD, XOP, USO, WIX, PEP, KO, TSCO, MAS, TRP, QSR, THD, FLT, PCAR
Trading Shorts: VNQ, SIG, KR, GES, CTXS, OSTK, CI, MHK, WATT, EXPE
Equities have been sideways now for the last 4-5 days, showing little to no progress in SPX, as this index along with NASDAQ Composite and the DJIA have not yet joined the NASDAQ 100 back at new high territory. Yesterday's main technical development concerned the breakout in WTI Crude oil which looks to help Crude make further progress. Energy stocks responded and were Monday's best performing sector and look likely to benefit a bit more from this Crude surge in the near-term. However, this sector has performed largely in-line with SPX, higher by 19.57% and Energy as a group has underperformed other sectors like Technology, Industrials, Discretionary, and Communication Services. While Exploration and Production stocks look attractive, others within Oil Services and Integrated oils have underperformed dramatically, making selectivity important.
Meanwhile, REITS took another leg down, and IYR, VNQ underperformed as STIC, RLGY, RHP, CLNY, WRI, SKT, MAC, REG, KIM were all down 2.5% or more. This latter group still looks likely to weaken further in the days and weeks ahead, and investors should hold off from trying to buy dips.
Overall, a more difficult tape near-term with a few signs in the last week of short-term breadth having dropped off a bit, and groups like Healthcare are primarily responsible, proving to be a definite drag on broader market performance given their 13.3% weighting in the SPX. However, until there is evidence of SPX dropping down under 2877 on a close, markets still have the chance of pushing higher, and some type of proof of weakness will be necessary to avoid.
Long XOP with near-term targets at 34.50, stops under 31.75
Long XLF with targets at 28-28.50- Stops on daily closes under 26.90
Long XLB with targets at 61 and stops on daily closes under 56.80
Short IWM for a move down to 151 from 155.2- Stops above 157.4
Long Copper for a move up to 308-310
Additional charts and thoughts below.
S&P's plodding along continues, which has been a source of frustration for both bulls and bears alike. For those newly involved, S&P has not yet broken out to new highs such as what's happened to the NDX. The hourly pattern here remains choppy and despite being upward sloping, a break down under last week's lows of 2889 in S&P Futures or 2893 would likely prove negative to Equities in the near-term. We'll use 2877 as being the key area to stop out trading longs, while movement back above 2915.75 should allow for a final push up to 2945-50 area, where this should stall out into early May. For now, insufficient reasons from a price standpoint to be too negative, but some upward acceleration here in both prices and breadth/momentum would be a source of comfort to bulls, as markets have been churning with no change of trend for the last 4-5 trading days.
Energy has begun to show a few signs of life in the last couple weeks, but it was Crude's breakout of the 8 day range in both WTI and Brent which helped XOP on Monday. This Exploration and Production ETF looks likely to follow through higher up to 34.50 in the short run. Energy has not really shown much outperformance to the broader market despite Crude's sharp rally in recent months. However, with regards to XOP, this does seem likely to gain some momentum after the technical breakout of this base which had been in place since January of this year. A breakout of this consolidation range should bode well for some strength out of XOP, and this ETF is favored over both OIH and XLE for outperformance within Energy.
REITS have begun to trend down very sharply in recent days and further underperformance out of this group looks likely. The VNQ, the Vanguard Real Estate ETF, when plotted vs SPX, has broken down under the lows of this triangle pattern it had formed back in December 2018. While stretched after the last couple days of losses, no evidence of this bottoming here is in place. Thus, additional pullbacks and underperformance for the group as a whole is expected in the days/weeks ahead.