November 9, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2790-1, 2774-5, 2763-5, 2742-3, 2730
Resistance: 2817-9, 2825-7
LINK TO TECHNICAL WEBINAR from yesterday: TECHNICAL WEBINAR11/08/18
SPX - (3-5 Days)- Upside limited- Sell rallies at 2820-5 and under 2790 is short for move down to 2763-5.
EuroSTOXX 50- Bearish- Thursday's reversal should have put in a near-term top for Europe and it's right to bet on prices pulling back next week - Targets down near prior lows 3090-3100
HSCEI- Bullish, Rally up to 11100 likely, then stalling out.
Trading Longs: PG, STZ, COST, DG, CCE, FDS, WMT, DIS, DISCA, CASY, PFE, ZTS
Trading Shorts: BYD, CDK, INCY, BMY, CX, AN, KMX, MAS, ETN, JCI, LM, WDR, MS, FTNT, SWKS, WYNN, LVS, MGM, SGMS, HBI, GPS
S&P showed some definite signs of stalling out, but by day's end, had not made sufficient deterioration to violate the uptrend from 10/29. However, upside looks limited here technically, and it looks right to pare down longs, sell into 2820-5 and utilize movement down under 2790 to short, expecting movement to at least 2763-5 initially.
Outside of S&P, the Dollar showed very strong upside yesterday, and should help the Dollar rally over the next 2-3 weeks, which should be bearish for Emerging markets in the near-term and potentially also commodities, specifically precious metals given the resilience of Treasury yields in holding up. Overall, it looks right to sell into this recent bounce in EEM, expecting pullbacks in the days ahead.
Sector-wise, XLF and XLI will both register TD Sell setups ( Nine consecutive closes above the close from four days ago) as of Friday's close. This is the first sign of upside exhaustion in both sectors since the bounce began in late October. It looks right to sell longs here and consider betting on both to turn down over the next 3-5 days. Bottom line, after the 200 point S&P rally in 7 days, the market looks to be in need of consolidation, so it's best to step aside, and/or hold off on initiating too many longs in the near-term, awaiting consolidation.
Short XLF expecting stallout and turn back lower to 26-26.50
Short XLI with initial targets 71
Short EEM with targets 70.25-70.50
Long XLP with targets at 58.90
Long EUO, thinking that Euro decline continues in the days ahead w/ US Dollar breakout
Additional charts and thoughts below.
S&P showed some definite signs of stalling out, yet failed to break the trend from late October. Breadth was negative but only partially so and most of the weakness occurred in Energy, as WTI Crude extended its decline yet again. Overall, upside looks limited for S&P as prices have reached an important time zone for trend change in my view, having rallied 38.2% in time of the prior pullback while having retraced 61.8% in price terms. Breaks of 2790 would solidify this rally as having made a minor peak, suggesting weakness down to 2763-5. At present, it looks right to hold off on longs after the 200 point S&P move over the past seven days, and consider hedging and/or utilizing shorts for at least a minor "give-back" next week.
EEM has shown evidence of failing to break out above the long-term downtrend from earlier this year, given the breakout in US Dollar yesterday. This is a negative in the near-term for Emerging markets for November, and anticipate weakness over the next 2-3 weeks before this can bottom out yet again. While the Dollar should be within a month of peaking out and turning down in 2019 technically, for now, additional rallies still look likely and this could serve as a detriment for Emerging markets this month. Bottom line, avoid adding to weakness in EEM right away, or consider shorting over the next couple weeks before a better risk/reward entry to buy appears.
Europe looks to have hit its first major resistance after having bottomed out near the key 3100 area in SX5E. Evidence of trend exhaustion is in place and it's likely that Europe stalls out and turns back lower. One can consider VGK, or FEZ as shorts, and/or EUFN, the Euro Banks ETF. Technically I expect a pullback over the next 3-5 days in SX5E, which could give up at least 50% of the bounce we've seen since late October.