December 28, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2429-30, 2407-8, 2385-7
Resistance: 2498-2500, 2519-23, 2547-9, 2565-75, 2600
SPX - (3-5 Days)- Bullish on a 3-5 day basis into early January with possible first target 2548, and a maximum of 2600-30 before stalling and pulling back. Look to buy any early weakness
EuroSTOXX 50- Downside limited and expect some support near 2900 before a turn back higher.
HSCEI- Mildly Bearish- A test of 9900 and slight break is possible, but expect HSCEI is close to holding and turning back higher.
Trading Longs: TEAM, SQ, I, IIN, TWTR, ETSY, ELY, CQQQ, NKTR, ALGN, STOR, CIEN, PFE, MRK, LLY, VAR
Trading Shorts: VGK, FEZ, WY, SGMS, MGM, RCL, LB, QRVO, CAR
Continued gains are likely for the next 3-5 days into early January, as yesterday's reversal helped prices engineer one of the largest intra-day reversals seen since 2010. S&P prices at one point were down to 2397 as of 2pm EST, and now are trading 2495, nearly 100 points, or 4% higher, just since 2pm yesterday. Breadth went from -4/1 negative to flat on the day, and the early high TRIN reading of 2+ was reversed. While the news was certainly helpful as a catalyst to the gains, most cycles suggest prices should be trending up into early January before a reversal.
Sectors like XLV, XLI, XLF, XLK all jumped to multi-day highs, and seem poised to continue up into year-end. Counter-trend exhaustion, meanwhile remains premature for S&P futures on most time-frames and will require a move over 2525 before starting to show any evidence of resistance being near, despite the huge price move which has just occurred. Overall, Treasury yields look poised to move higher, and should serve as a positive catalyst for Financials to begin to firm after several rough months.
Overall, Wednesday's gains look temporary, yet still premature to sell. Therefore a long bias makes sense into end of year.
Long Financials- XLF with targets near-term at 24.50-.75
Long Industrials- XLI with targets at 65.50 minimum and possibly 67 before stalling
Short Treasuries looking to add on a yield move above 2.81, and then more above 2.85 which would be an official breakout of the two-month downtrend
Long Crude oil, with near-term targets $48.50-$49 , expecting WTI's move yesterday likely continues. Over 50 would be quite positive for Crude
Additional charts and thoughts below.
SPX managed to close right up at its highs in a very sharp reversal higher in the last two hours of the session. This is quite bullish for the days ahead most likely, given the lack of any counter-trend exhaustion signals, and should allow for a push up to 2548 -2576 without much trouble over the next few days. Minor weakness should be bought Friday, but it's thought that prices extend.
Industrials, via XLI, sold off right to key intermediate-term trendline support on the trend since 2009 and reversed sharply by the close. At $63.94, further gains look likely up to $67 before stalling. While the intermediate-term momentum is negative, for now, over the next week, a long bias looks prudent.
Equal-weighted Technology vs SPX in ratio terms is on the verge of potentially breaking out of the entire downtrend which has been in place since June, over six months ago. While this has not happened yet, it's important to watch carefully, for when this occurs, it should be a very positive influence for this sector, in my view.