November 28, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2664-5, 2649, 2633, 2622, 2600-3
Resistance: 2700-2, 2725, 2753-5
LINK TO TECHNICAL WEBINAR from Thursday 11/14 - CLICK HERE: ThursdayTechnicalWebinar
SPX - (3-5 Days)- Bullish- SPX and NDX have both exceeded the downtrend from 11/7 while Treasury yields also look to be trying to stabilize and turn higher. Overall, a move up to 2725 looks likely. Downside has support 2633
EuroSTOXX 50- Mildly Bullish, turning bullish OVER 3190 on a close for a move back up to 3300. Stops on longs near 3114
HSCEI- Mildly bullish, turning more bullish on close over 10678 with targets at 11077, with stops at 10200
Trading Longs: FXI, FDS, CVS, TEAM, ETSY, CHD, LLY, MRK, AJG, ICE, CME, VRSK, CQQQ, PG, COST, CCE
Trading Shorts: TSN, AMBA, ETN, RL, FLIR,EMR, VMC, OI, EZU, NFX, WMB, BCO, CLVS,
A decent push higher yesterday in Equities despite the mass uncertainty still present, given lack of clarity and overall uncertainty regarding both Powell's upcoming plans, as well as the possibility of tariff escalation. Near-term, US markets seem to have shrugged these fears off and rallied to the tune of 0.25% or greater. This was successful enough to let SPX exceed the downtrend from early November (which hits for S&P Futures at 2700) Additionally, prices managed to fill and exceed the minor gap, while NASDAQ showed some followthrough of its own in making the second straight day above the key downtrend from early November.
Overall, despite any "news" being released yet, declaring that tariffs have been resolved, we're beginning to see increasing strength out of Technology in recent days which has now turned in sufficient strength to show positive performance over the last week, only one of three sectors to show such strength. Meanwhile the rally in the US Dollar has coincided with precious metals and other commodities weakening, and such behavior very well might continue into mid-December before any Dollar peak/commodity bottom.
For now, its worth mentioning that a few sectors have begun to trade better in recent days/weeks, and Technology being 20% of SPX, is one of those sectors. While impossible to cast any sort of accurate depiction of how the final six weeks of the year should play out, it's likely that the strength in Financials, Healthcare and now beginning of Tech strength should at a minimum allow some sort of rally to play out, and how long this lasts will have much to do with the degree of participation, breadth and momentum.
Long CQQQ --targets in mid-50s initially
Long TBT with target 41.35
Long KRE 54.99, looking to add on close over 56 for a move to 58.50
Long XRT with targets 48.50
Short EURUSD with initial targets lowered to 1.1225
Additional charts and thoughts below.
S&P has now matched the NDX 100 in its progress in exceeding the downtrend from early September/early October. This happened in the NDX last Friday and was an constructive development in suggesting Tech might be ready to start to trend higher. Now both SPX and NDX are above this downtrend and despite a lack of clarity on many of the key issues that many say are important for markets, the equity indices seem to be onboard and can rally. Overall, i'll stick to my 2700 target as being important to exceed for a larger rally. However, the last couple days were quite constructive and if SPX can get past Powell's speech on Wednesday without any hitch, further rallies should occur into early December.
Gold experienced its most important and negative day in November thus far, rolling over to negative territory which given the momentum shift, might allow for prices to come in materially but ultimately set up an attractive buying price. Initially, the area at 1205 has importance, and cannot be breached without suggesting a major trend down is underway. The pattern over the last couple months is more bearish than bullish, in showing a rolling period of consolidation. Yet, being above 1195 keeps the trend more neutral than bearish. For now, Gold and the precious metals likely underperform near-term.
On CNBC yesterday, we had a fruitful discussion on which stock should outperform between MSFT and AAPL, given that the former had now gained ground to come within striking distance of AAPL's Market capitalization. I stated that MSFT looked like the better overall stock given a lack of deterioration (only down 8% from its All-time highs, vs 20%+ for AAPL.) However, AAPL appeared like the better trading vehicle for the following reasons. 1) Prices have pulled back to trendline support from 2016. 2) RSI has neared oversold territory, the lowest since early 2016. 3) Prices managed to close well off their lows on very bad news, the second straight day of prices holding up well at a time when they easily could have weakened materially on the threat of tariffs. Overall, trading bounces look more likely, and should prove more robust in AAPL than MSFT. For now though, MSFT is the superior play, technically given the lack of trend damage. While momentum has begun to stall on MSFT on monthly charts while RSI has dipped, the monthly chart still shows the extent to which MSFT is overbought, while FB is now down near critical SPY support.