November 30, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2722, 2700, 664-5, 2649
Resistance: 2550-2, 2764
LINK TO TECHNICAL WEBINAR from Thursday 11/14 - CLICK HERE: ThursdayTechnicalWebinar
Webinar from yesterday had Video faults and was unable to be posted- Mid-day link with video today
SPX - (3-5 Days)- Upside should still prove limited as overbought situations remain and yesterday's late day push did result in some negative divergences. Look to buy pullbacks to and buy back under 2700.
EuroSTOXX 50- No change in Europe- 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- NO change- 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: FB, XPH, LLY, TMO, MRK, MOS, CHD, CQQQ, FXI, FDS, CVS, ETSY, AJG, ICE, CME, VRSK,, PG, COST, CCE
Trading Shorts: STX, WDC, AMBA, ETN, RL, FLIR, EMR, VMC, OI, EZU, NFX, WMB, BCO, CLVS,
The final trading day of November is upon us. We've seen S&P claw back to register a near 1% gain for the month thus far, while NASDAQ is down for November, lower by 0.45%. The Dollar has gained ground, Bonds are showing evidence of near-term rallies (given 10yr yield break) . Commodities have gradually withered given the USD rally and Crude remains hovering around $50 after its sharp pullback, while Gold has disappointed bulls, despite the negative sentiment. Meanwhile Cryptocurrencies have experienced a horrific decline after breaking support which goes against their normally bullish seasonal tendencies in November/December. Overall, a great month for traders, but genuinely difficult one for most investors, and tough for many to have conviction given the possibility of tariff escalation and Powell seemingly set to continue rate hikes, though cleverly coming off a bit more dovish after his recent talk.
Overall, yesterday's pullback was largely disappointing for the bears and finished largely unchanged, but yet stalling out in a fashion that seemed likely technically speaking after the big 100 point S&P run-up to the tune of 4% over 3 days. We've seen Financials and Healthcare dominate in outperforming lately while Technology appears to be slowly but surely firming. Momentum has improved in Stock indices and MACD has turned back to positive following one of the best weeks in the last couple years for DJIA.
In the short run, some additional work needs to be done to have confidence that equities have begun a "Santa Rally" 2750 is key for S&P and getting above that would help prices push higher to the all-important 2810-5 area. While breadth and momentum have improved on better price action, momentum remains overbought, and this juncture near 2750 still seems to be difficult to claim is something to ignore. When weekly and monthly momentum are negative and prices have gotten overbought on intra-day bases, that typically represents the most challenging of environments. My technicals suggest that this should be the start of a seasonal push higher, and not just a minor bear market bounce that should lead back to lows right away. Near-term, further stalling out looks likely, though on a breakout of 2750 in SPX and 6950 in NDX, one has to respect that, and think that kicks off the rally into year-end. Sentiment certainly appears to support this idea, as it remains much more bearish than usual for the end of November. Overall, a mildly bullish stance is recommended, looking to add to bullish exposure on any pullbacks into the early part of December. Some charts that try to make sense of recent movement are shown below.
Long CQQQ --targets in mid-50s, stops at 42
Long XPH- Targets at 47, with 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.
NDX has pushed up to near key downtrends from October, similar to SPX. This would seem to be decent resistance. Yet, momentum has turned positive on this move given how strong a push higher we've seen. Thus, on any backing off in the days ahead, this should allow for dips to be bought, vs thinking a larger selloff down to lows should occur. Movement over 6950 would be positive for NDX and this should be watched carefully for evidence of trend acceleration, given that December is approaching and sentiment remains negative.
Pharmaceuticals look increasingly attractive of late, considering the breakout back to new high territory. Yesterday's Cup and Handle breakout in the DRG is quite positive for this group, and quite a few stocks like LLY, MRK, TMO, PFE, and others have been breaking out technically in a fashion that suggests this group should continue to lead. Near-term, one should overweight this part of Healthcare and look to add on dips if given the chance in the days to come.
US 10-Year Treasury yields have begun to trend in the opposite direction of how they've traded vs Stocks for the last couple months. As this overlay chart shows, both yields and stocks peaked on 10/3 and then bottomed in late October. Then yields peaked on 11/7 along with stocks and trended lower. Lately, stocks have rebounded this week, however, while 10-Year yields have broken down. Given this prior relationship, it might be early to suggest this divergence should simply lead to stocks and bonds starting to rally in unison again. For now, stocks have not rolled over, and TNX appears to have broken down under prior lows. This doesn't suggest an immediate trade, but simply to be cognizant of this relationship when it starts to diverge.