November 2, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: firstname.lastname@example.org
SPX Cash index
SUPPORT- 2718-20, 2707-9, 2696-8, 2673
RESISTANCE- 2743-5, 2751-2, 2763-5, 2773-5
LINK TO TECHNICAL WEBINAR from yesterday: https://youtu.be/M0QTkufNncA
SPX - (3-5 Days)- Mildly Bullish- Still expecting that S&P should move up to 2745 with a maximum near 2765 before some consolidation sets in post mid-term Elections. Use dips to buy Friday near area of the breakout near 2707-12
EuroSTOXX 50- Mildly Bullish- Still expect Europe to underperform US, but 3100 looked to b very good near-term support for SX5E, so expect that Wednesday's end of month rally likely follows through a bit- Long in small size, looking to add on weakness
HSCEI- Bullish OVER 10220, bearish under- The last few weeks have been largely neutral and while it's looking increasingly likely that a low is close, it's necessary to see proof of the price strength.
Trading Longs: IIN, CI, CCE, EWZ, CME, SBUX, ROST, NVDA, XLNX, TEAM, BABA, TLYS, FB, VICR, YEXT, TNDM, VZ, MCD, C, FITB, KEY, WMT, JWN, TBT, DIS, DISCA, CASY, PFE
Trading Shorts: DUK, D, SO, NI, XLU, WYNN, LVS, MGM, SGMS, HBI, K, GPS, GILD, KMX, MNK, KMB, AMP
Still difficult to fade this move in S&P despite the 100+ handles off the lows this week as we've seen some constructive price action and improvement in both breadth and momentum. While AAPL dropped post close Thursday, futures dropped only temporarily and further into the evening as of 9pm were solidly back in the green, while NASDAQ had recouped most of its loss and was trading flat. Until/unless we see S&P give back the area of its recent breakout, which lies at 2707-12, it's right to use any minor weakness to buy, expecting further strength into next week before any meaningful stalling out.
Overall though, this week's rebound has been a real success at a time when the market direly needed it. The 3 back to back 1% days have only occurred on four other occasions in the last 10 years: February and June 2016, October 2011 and May 2009. Each of those occasions marked a chance to follow those rallies as all extended further , and were not a chance to sell into right away. Technically speaking, this week's gains have exceeded the downtrend from early October along with having regained prior lows from early October, both bullish developments. Additionally, momentum has begun to trend back higher sharply on a daily basis after having shown positive divergence in recent weeks and the price breakout helped this to start to rebound yet again. We've seen Financials and Industrials both make convincing movement back over prior lows that were seen from this past Spring/Summer and both XLF and XLI look to have made false breakdowns that were immediately recouped. Overall, While Friday might start out on the downside, it looks right to use weakness to buy dips after the 100+ S&P point move we've seen since early this week. While weekly and monthly charts still have ample work to do to repair momentum, the Daily trend still appears like higher prices can happen into mid-term elections.
Long XLF, adding on close over 26.31
Long KRE given pullback to Fall 2017 lows - Expect bounce to high 50s
Long XLI, looking to add over 70.67 for a move to 74.50-75
Long EUO, thinking that Euro decline continues in the days ahead w/ US Dollar breakout
Additional charts and thoughts below.
S&P- Still early to sell gains- Expect move to 2745-65 into early next week before stallout. S&P has now recouped around 61.8% of the prior pullback from 10/17, yet still has not signaled that pullbacks are imminent. Following three straight 1% days of gain, targets lie between 2745-2765 on this first move off the lows. Then following consolidation, it's likely that additional gains occur. For now, despite the post close AAPL decline, targets should still lie above near 2745, and tough to sell here expecting any meaningful pullback. 2707-12 is the true line in the sand, and until that's breached, it pays to stay long and buy dips.
AAPL- Post earnings decline should be buyable down to 206- Under on a close postpones gains, and hold off til 195-200. AAPL took up much of the post market attention as the announcement of no further unit numbers being announced resulted in a sharp decline post market, and AAPL fell down to this week's lows, near $206 in after market trading. This will be a key level to hold for this stock given its weighting in many ETFs, and failure to immediately rebound back over 212 and/or any breach of 206 is likely to result in some near-term selling pressure for AAPL. This would violate the near-term uptrend on daily charts, while the weekly charts have strong support down near 185, or another 10% down, which connects the longer-term uptrend from 2016. Overall this stock has held up in much better fashion than most of its peers throughout the October pullback, so a minor decline post-earnings won't detract too meaningfully from its longer-term uptrend. AAPL remains an outperformer and in better technical shape than stocks like AMZN or FB.
Sell Utilities- Utilities look to have bounced to a key area to sell, when looking in relative terms of XLU vs SPX as shown on daily charts above. This ratio broke down sharply in early 2018 when rates started to trend higher, and while choppy through most of this year, the pattern remains negative. Given that US equities have begun to trend back higher in the near-term, along with Treasury yields still maintaining their own uptrend, it looks right to sell into the Utilities, expecting underperformance with stocks and bond yields moving up. Utilities like DUK, D, NI, and SO are a few of the technically unattractive stocks to avoid at this time and/or consider shorting for aggressive traders. Further weakness looks likely as this relative chart starts to turn back lower. XLU getting under 52.80 should mark the start of a slow pullback to the high $40's.