December 11, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2583, 2575-6, 2557-8, 2532
Resistance: 2645, 2675-80, 2708
SPX - (3-5 Days)- Bearish until/unless 2645 is exceeded, which would lead up to 2675-80, the larger area of trendline resistance. While yesterday's About face was more positive technically than prices closing down at the lows of the day, still not too much conviction of a low in place. and prices are in No-Man's Land.
EuroSTOXX 50- Bearish with target at 2900, the 50% retracement of the entire move up from 2011.Rallies will need to get back over 3125 to have any real confidence of a low at hand.
HSCEI- Mildly Bearish- Target 9900-10100 sometime this week before stabilization and then rally in back half of December- Pullback not as severe as US and should be used to buy- HSCEI has been strengthening vs US relatively , so recent weakness is not expected to break October lows.
Trading Longs: AEE, EVRG, EXR, CHD, PG TLT, IAU, GLD, PFE, LLY, ETSY, TWTR, HEAR, TNDM
Trading Shorts: CE, DOX, FCX, QRVO, CAR, BWA, MAS, ITB, PHM, LEN, FOSL, BBY, BCC, BGG, STX, WDC, KORS, CCEP, ETN, RL, FLIR, MRO, XEC, VMC, OI, NFX, WMB
Despite the 60 point S&P bounce from 2583 into the close, prices are still trending lower, and have not broken the trend from early December. (Yes, that's the kind of volatility which exists nowadays) While its a definite positive rather than negative to have moved back up above 2600, this area is widely regarded as "No-Man's Land" and 2682 needs to be surpassed, at a bare minimum to have some kind of conviction of a trading low (My Weekly Technical Perspective note yesterday am discussed falling initially and then the chance of recovering 2600 given all the eyes on this level)
Overall, a move in Futures above 2645 would be a positive for a move up to 2675-2680. However it's thought that a close over 2682 is really necessary to help S&P start to climb back over the balance of December. For now, a snapback rally like we saw yesterday is no guarantee of any real low at hand. There remain sectors like Financials and Transports which closed down near lows of the day and Small-caps were equally hard hit, so the minor rally in Technology for Monday was a positive, but was definitely offset by declines >1.4% in both Financials and Energy.
Outside of Equities there was some evidence of the Dollar turning higher near-term with the British Pound having broken down to the lowest levels since last Spring on Brexit complications. Until we can see the Euro and Pound start to stabilize a bit more, it will be tough to expect too much of a commodity rally, and the Dollar could turn up for another 2-3 weeks into late December before turning down. This would mark a runup into a prominent two-year anniversary, and should be watched carefully this month.
Looking to sell GBPUSD above 1.26 for a move to 1.21, potentially 1.20
Looking to buy WTI Crude on weakness below $49 over the next couple weeks
Long Gold and Silver- GLD, IAU and SLV for movement higher
Long Treasuries with plans of TNX moving to 2.80-2 before stabilizing
Additional charts and thoughts below.
SPX structure has not yet broken down based on yesterday's ability to rally up off early lows after 2600 initially was violated. This area between 2600 and 2682 is largely considered "No-Man's Land" . While it seems difficult to get long after a 60 point rally which remains trending down from early December, it's also getting tough to be short and withstand these violent whipsaws. Overall, groups like Utilities and Telco both managed gains and might be better than attempting to pick bottoms in Market indices.
IWM had a similar but worse break than SPX last week and still looks early to bottom out, which casts some doubt as to an immediate market turn back higher. The next 5-7 days still look to be weak for IWM, and for those positioning, Large caps are far more attractive than Small given the recent breakdown in absolute terms (which is also present on relative charts)
British Pound Sterling v USD dropped to the lowest levels since last Spring yesterday which coincided with the DXY turning back up sharply from key support and commodities withering. Near-term, it will be difficult for the Dollar to turn down as thought possible in December until we see some stabilization in the Pound and also Euro. For now, Demark daily signs of exhaustion are present, yet nothing on weekly charts and will take another 3-5 weeks before any meaningful weekly low. Thus, any bounces in the days ahead back up above 1.26 would likely be a chance to sell, for pullbacks lower to 1.20 before this holds. Overall, a US Dollar peak likely could materialize near 2 year anniversary highs in late December.