March 8, 2017
S&P MARCH FUTURES (SPh7)
2361-3, 2357, 2349-51, 2345 Support
2373-5, 2381-2, 2390-2, 2400-2 Resistance
S&P Futures: (2-3 Days)- Bullish- It still looks right to give the Bulls the Benefit of the doubt, as prices closed up above support at 2365 and now HOURLY TD COMBO buy are present. While there are notable warning signs of breadth divergence & more stocks hitting new lows than highs, it still looks MORE likely in the short run that prices move higher to get above 2400. Hourly close under 2361 as of Wednesday's trading could drive a bit more weakness, and should serve as a stop to half longs, with 2349 on the balance.
SX5E- EuroSTOXX 50- Bullish- No change- Minimal weakness on Tuesday and prices have remained in sideways consolidation over the last few days, which should lead to an upside breakout. The breakout last week should still help SX5E move higher up to near 3525.
HSCEI- Bullish- Tuesday's close at new 3-day highs should be the start of a push back higher for HSCEI, with movement over 10451 being particularly important for near-term prices. The intermediate-term chart is quite constructive, so this is near-term only. Pullback down to near 10100 or 10000 looks likely.
Longs/Shorts for a 3-5 day period: NO Change from Thursday
Technical Longs: EA, ATVI, AAPL, FAST, COL, UNP, HUM, CI
Technical Shorts: KORS, AN, MNK, GILD, TSN, COST, SPLS, FOSL, HTZ,
Tuesday's selling proved mild, and by end of day, finished above support at 2365 that would have signaled the start of perhaps a larger pullback to 2349-50 area. At present, it's still right to give the Bulls the benefit of the Doubt. Stocks like AAPL which carry huge weight in many indices continue to look quite strong technically, and Treasury yields look to be breaking out above important trendline resistance. Both of these have positive implications for Technology and Financials respectively. Until we see some evidence of this changing (and Treasury auctions might reverse this breakout.. we'll see) it pays to think further upside can happen into FOMC.
However, there was some evidence of stalling out in one sector that does have moderate implications for stocks. Healthcare was the one sector that showed a large reversal of trend Tuesday given the GOP's Healthcare bill to replace Obamacare. XLV fell to multi-day lows by end of day, violating the steep uptrend after prices had reached near-term resistance at $76 near last August's highs. Stocks like ESRX, ALXN, MNK, REGN, UHS, MCK and EVHC all fell more than 2% and many still look to extend losses on Wednesday given prices in many cases finishing at their lows. More on this with Chart and analysis below.
Finally, the Metals complex has been under substantial pressure of late with meaningful reversals of trend for Copper, Steel, Iron Ore and the Precious metals. Gold slipped down under 1217 today and has been persistently weak given the uptrend in Treasury yields combined with US Dollar strength. This looks likely to continue in the short run, and most would be wise to avoid the Metals as yields and the US Dollar trend higher. Additional comments below.
Additional thoughts and charts found below
S&P fell back into the consolidation by Tuesday's close by a fractional amount, and did undercut Monday's lows, despite not breaking 2365 in March futures. For now, it still looks premature to call for a larger pullback. Factors such as sectors like Financials, Tech, Industrials, Discretionary still holding up well are important reasons to support further resiliency. Additionally, Treasury yields attempting to breakout, as mentioned previously, should help Financials make further headway.
Healthcare's rollover given the introduction of the American Healthcare Act resulted in the XLV pulling back under the lows of the last week, closing at/near its lows. This should result in further near-term weakness in this sector, and stocks which experienced the greatest weakness, such as MNK, ALXN, PRGO, GILD, all look to weaken further in the next 2-3 days, and are early to buy. XLV is likely to fall to $73.15, or a maximum near $72.31 as a maximum area of support before rallying back. For now, it's thought that this correction should prove short-term only. While not shown above, the area at $76 is very important on weekly charts, lining up with last August's highs along with key trendline resistance over the last few years. So both daily and weekly charts give compelling reasons why this is likely to retreat in the short run.
Silver has been even weaker than Gold in the near-term, breaking its uptrend from last December and giving back 38.2% of the prior rally. Prices closed at their lows yesterday, inviting even further weakness in the days ahead, and Technically its right to expect Silver to reach $17.15 at a minimum on this move. Stocks like SLW and SSRI have both begun to rollover in mid-February and back off , and also look to experience further weakness. For now, precious metals should be avoided, but silver is likely to move lower at a quicker pace than Gold.
This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice. Newton Advisors, LLC has no duty or obligation to update the information contained herein. Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.
Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report: This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.