November 15, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2683-5, 2666-8, 2633
Resistance: 2759-64, 2767, 2787-9
LINK TO TECHNICAL WEBINAR from last Thursday- CLICK HERE: TECHNICALWEBINAR11/08/18
SPX - (3-5 Days)- Mildly bearish but feel downside limited to 2666 between now and Friday- Look to cover shorts on pullback Thursday & S&P should be close to trying to bottom out
EuroSTOXX 50- Bearish- - Targets at 3192, then down near prior lows 3090-3100
HSCEI- Bearish- Pullback under 10354 should lead to a potential "final" move down to test 10k and early Nov lows before December rally. Target could end up near 9700-9800 for covering shorts and buying
Trading Longs: AAPL, FIVE, LULU, XLU, WEC, DTE, SCG, QID, SQQQ, FIVE, PG, STZ, COST, CCE, FDS, WMT
Trading Shorts: SGMS, FXI, EEM, H, PSX, SLB, DVN, TXT, CTAS, LYB, PPG, ALGN, WDC, ETN, LM, WYNN, LVS, MGM, HBI, GPS
S&P attempted a fleeting rally ahead of the open Wednesday that failed to make any structural progress before turning down sharply and violating the early morning support at the 50% retracement area at 2710. This suggested a possible test of 2685, which did in fact occur within a point on Wednesday before another bounce, and prices failed to make much progress before turning down again.
Overall, prices should be within striking distance of trying to bottom out by Friday of this week, with maximum downside in price and time hitting the following week during the shortened holiday week next week. The reasons are as follows: First, signs of positive momentum divergence are materializing on daily charts and hourly. Second, breadth is holding up better during this recent pullback, with barely 2/1 negative breadth on this recent setback. third, hourly charts have gotten oversold and key Tech and index holdings like AAPL are down near important trendline support. Fourth, sentiment has slowly but surely started to get more and more negative, as many scratch their heads as to "why" stocks are selling off while earnings remain in good shape. Fifth, we've entered a very bullish seasonal time which although hasn't worked out thus far, should provide decent entry points ahead of the holiday given the conditions above. Look to use any further weakness Thursday to slowly exit shorts and consider adopting longs, like AAPL (see below) that have fallen to near key trendline support. The Retail space is also attractive and several of those stocks will be covered in detail this coming weekend ahead of the Black Friday seasonal boom for Retailers.
Covering XLF shorts
Long XRT to get Retailing exposure ahead of next week, expecting outperformance
Short XLI with targets 70.30
Short EEM with targets 70.25-70.50
Long EUO, thinking that Euro decline continues in the days ahead w/ US Dollar breakout
Additional charts and thoughts below.
S&P's daily chart shows why it's been right to have a defensive bias in recent days given the severing of the minor uptrend from late October. Prices have now breached the 50% retracement area of this prior October bounce but look to be closing in on support to buy. This could materialize by Friday of this week near 2666-83 with maximum pullback to 2635 in my view by next week before a very healthy counter-trend rally gets underway. Signs of positive momentum divergence are materializing on daily charts and hourly, while breadth is holding up better during this recent pullback, with barely 2/1 negative breadth on this recent setback. While prices closed down near their lows and daily charts continue to look unattractive, sentiment has slowly gotten more negative lately right ahead of the holiday. Overall, while its been correct to bet on downside, we're getting close to a time when it should be right to cover shorts and be long, and that could come about as early as Friday. Look to cover shorts and buy dips at 2666-82.
Apple (AAPL) has finally started to look interesting after a 20% pullback from 52-week highs. This has now reached weekly trendline support (180-5) and shows nearly a perfect price/time confluence from the early October highs (1x1) 43 calendar days along with 43 points down is very close to where AAPL closed Wednesday, and should be an area where this stock can bottom out in the next week. While given the big pullback on heavy volume might seem worrisome on daily charts, the weekly charts provide some perspective as to why this stock might bottom out in the days ahead.
Breadth spiked a pretty healthy amount during the rally from 10/31 into 11/7, and as this chart shows, we saw the percentage of SPX stocks above their 10-day moving average (m.a.) spike up to 90%. This looks to be a healthy signal and even on the drawdown this past week, this has managed to hold up at fairly high levels, along with the percentage above their 50-day m.a. at 37%, well above levels seen in mid-October, despite S&P being down near 2700. This is encouraging as breadth has not followed price down lately and should set up for a buying opportunity in stocks in the next 3-5 trading days.