December 4, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2775-7, 2761, 2722
Resistance: 2802-3, 2814-5, 2841-3
LINK TO TECHNICAL WEBINAR from Thursday 11/14 - CLICK HERE: ThursdayTechnicalWebinar
SPX - (3-5 Days)- Bullish- Additional strength likely to test and exceed Nov highs at 2815 into next week. The ability to exceed that allows for some decent push to 2841
EuroSTOXX 50- Mildly Bullish, Expect Europe can rally up to 3280-3300, but that remains its first real test, the area of the prior breakdown.
HSCEI- Bullish- Breakout happened Monday and should result in strength in the days and weeks to come. Long with targets initially at 11077, with stops at 10571. Above 11077 can allow for meaningful strength to 11453, and above to 11932
Trading Longs: VRSN, EXAS, HRC, AAPL, AMZN, MSFT, TWTR, FB, XPH, LLY, TMO, MRK, V, MA, LB, MOS, CHD, CQQQ, FXI, FDS, CVS, ETSY, AJG, ICE, CME, VRSK
Trading Shorts: ATVI, TTWO, GIS, CCEP, EZU, STX, WDC, ETN, RL, FLIR, EMR, VMC, OI, NFX, WMB, BCO
December started off with a real Holiday surge given the Trade War truce announcement and yesterday's gains likely pave the way for further upside in stocks into next week. Breadth finished at nearly 3/1 bullish while Energy, Discretionary, Technology, and Materials all closed higher by more than 1.5% on the session. WTI Crude along with Grains both closed meaningfully higher, while Treasuries continued their recent positive correlation with Equities as both moved in tandem yet again. Yield curves plunged on 2/10 down to the lowest of the year, while inverting when looking at 3's/5's and directly coincided with underperformance in groups like Financials. For now, this trend of stocks and bonds moving together looks to continue. While Financials had paved the way for market gains over the last week ahead of this past weekend's announcements, it was the Materials and Tech stocks which directly benefitted post Truce news.
However, the most important move looked to happen outside of US and directly with Emerging markets, as China's HSCEI broke out of a trend which has led prices down much of the year, while Emerging market ETF's like EEM broke out of similar trends. This looks bullish for this style group and EM likely can show some further outperformance near-term, which would accelerate on evidence of the US Dollar turning down more forcefully. For now, the pullback in yields while USD stagnates has been sufficient to coincide with a lift in EM as China warms up to the idea of a tariff "cease-fire" .
Long CQQQ --targets in mid-50s, stops at 42
Long EEM with targets at 44.80- Yesterday's breakout important
Long XLB at 55.60 or better, looking for movement up to 59
Long XPH- Targets at 47, with stops at 42
Long KRE 54.99 with targets at 58.50
Long XRT with targets 48.50
Exiting TBT longs as yield decline has broken support and right to be long TLT near-term
Exiting EURUSD shorts as recent churning and indecision warrants looking elsewhere with Dollar likely to peak soon, and EURUSD rally by year-end
Additional charts and thoughts below.
NDX's breakout worth following near-term, as prices got above important resistance near 6950 and likely to challenge and exceed 7200. Many Tech stocks showed evidence of stabilizing near-term and AAPL's ability to close up near highs of the session in particular was thought to be a bullish development which warrants sticking long this stock and Technology as a whole for a holiday bounce. Under 6839 necessary to stop out longs and postpone the rally.
Emerging markets are showing compelling technical evidence of trying to turn higher, as yesterday's trendline breakout was the first meaningful move above long-term trendline resistance since late January of this year. This suggests the potential for some gradual strength in the EM space, and one should consider being long EEM with targets near $44.80.
US 10-Year Notes have begun to show larger evidence of rallies of late, and the breakdown in the long end of the curve with 10 and particularly 30 year yields has caused many yield spread combinations to go sharply lower (flattening out ) While the 3s/5/s curve inverted yesterday, the 2s/10s curve has fallen to new lows for the year. This looks important, but for now, very much premature to make too much of until this inverts. (Even then there has historically been a significant lag between when the Yield curve inverts and economic conditions deteriorate. For now, additional flattening in 2/10 curve looks probable.