November 29, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2722, 2700, 664-5, 2649
Resistance: 2550-2, 2764
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SPX - (3-5 Days)- Upside limited between today and early next week- Look to short 2750-1, and buy back under 2700.
EuroSTOXX 50- Mildly Bullish, Expect that Europe might to play catchup with US, but Europe far weaker and upside likely limited in the short-run up to 3263 before consolidating along with SPX.
HSCEI- Mildly bullish, Very close to breakout, which i think can happen between now and early next week- Right to be long here, adding to longs over 10678 with targets at 11077, with stops at 10200
Trading Longs: CQQQ, FXI, FDS, CVS, ETSY, CHD, LLY, MRK, AJG, ICE, CME, VRSK,, PG, COST, CCE
Trading Shorts: TSN, AMBA, ETN, RL, FLIR, EMR, VMC, OI, EZU, NFX, WMB, BCO, CLVS,
An absolute "Melt-Up" yesterday following Powell's speech, with broad-based participation and decent breadth of over 4/1 positive. Nine sectors out of 11 finished up at 1% or greater, while five sectors, Consumer Discretionary, Healthcare, Technology, Industrials and Telecom, finished up greater than 2% on the day. Technology led the way, which was encouraging, but something discussed over the last few days as being a possibility given the setup in NASDAQ and counter-trend Buy signals in Equal-weighted Tech vs SPX.
Overall, this was a convincing move internally, yet as with everything, it likely needs to be consolidated, as prices have gotten overbought very quickly. Charts of 120 and 240 min duration on SPX show RSI over 75, which has coincided with prior peaks in price and/or has shown upside prove limited. Additionally, prices now lie near trendline resistance from the actual October peak lower (Two days ago we saw breakouts of the Nov decline which were important.. now comes the bigger line in the sand) Bottom line, it's likely that prices stall out between now and end of week and make at least a minor pullback into the first week of December. The shape, breadth and momentum on any consolidation will be of utmost importance as to how short-lived it is, and how buyable. Given yesterday's impressive breadth, any pullback on 2/1 breadth or lower should prove to be a buying opportunity at 50% retracement or higher of the recent rally. (5/1 or greater downside breadth that shows SPX undercutting 2680 would be a larger concern regarding a deeper retrace)
Long CQQQ --targets in mid-50s, stops at 42
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 surged up to the next real area of resistance, found between 2745-2751, which as shown on this 240 min chart, lies right near current levels. 4-hour charts show the presence now of TD Sell Setups while RSI has moved to the high 70s however, indicating that near-term upside is likely to prove limited. From a trading perspective, it's right to consider lightening up between today and Friday, and for aggressive traders, to short movement above 2750, as there likely will prove to be strong overhead resistance. (This might make sense for those wishing to take risk off ahead of this weekend anyhow) Though most of China, as shown below, is in good technical shape, so the extent of any selloff might prove limited for now. For S&P, downside could take prices to 2700 or below to 2685, but should be buyable. The key will be to keep an eye on breadth and momentum over the next 3-5 trading sessions. For now, despite a decent near-term breakout in AAPL, the SPX appears to be near key areas to consider selling.
Eurozone stocks, shown by EZU, or officially, the Ishares MSCI Eurozone ETF, have also begun to improve similar to US and Asia and look buyable for a move higher in the weeks ahead, potentially finally starting the Santa Rally. While US has gotten near-term overbought, this breakout in EZU argues for longs in Europe for the first time in the last few months. Rallies to the low 40s look likely and dips in the next week likely prove to be buyable as prices have broken out of the trend which has been underway most of the last six months.
Ahead of this weekend's G-20 summit and the Trump/President Xi dinner, Chinese Technology looks to be turning higher, which is directly coinciding with improvement in China's HSCEI and SHCOMP indices. This could very well mean that negotiations are in order as opposed to Tariffs and/or that the tariff escalation does not happen as planned. Many of the companies in this group, shown by Invesco's CQQQ, or the China Technology ETF, include weightings of BABA, TCEHY, BIDU, NTES, have begun to stabilize after severe declines in recent months. The daily chart of CQQQ shows this breaking out above a downtrend which has lasted most of the year. Many fundamental analysts have been pounding the table on this area all year as being undervalued, but this is the first time for most of 2018 that the technical picture is starting to change for the better and argues that being long this space is correct. One can buy CQQQ with targets initially in the mid-$50's and stops at $42.