June 13, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: firstname.lastname@example.org
S&P 500 ETF Trust SPDR (SPY)-
276.38, 275.82, 275.09, 274.24 Support
279.27, 281.21-53 Resistance
LINK TO TECHNICAL WEBINAR from last Thursday: https://stme.in/Z1TiZuapkS
SPX - (1-2 Days)- Upside should prove limited, and reversal possible betweenWednesday and early next week with an ideal time for next Mon/Tuesday- Look to short S&P at 2810-5, while QQQ can be shorted at 176 up to 178.50 into late this week, expecting trend reversal. Movement under last week's lows at 173.18 for QQQ and 2763 for SPX likely means markets have peaked.
SX5E- EuroSTOXX 50- Mildly Bullish- A bounce looks to be underway which might reach 3520-30, but doubtful this gets back to 3600. Any move back lower under 3422 turns the trend back to bearish quickly for a move down to 3300 or below.
HSCEI- Bullish- No change-Rally to 12525 likely, and above should lead to 12811. Neutral pattern since February, but a good risk/reward and some evidence of this trying to carve out a low given USD weakness of late.
Trading Longs: FDX, FDC, GRUB, EL, HCA, MYL, MRK, BAX, GILD, CF, NTR, PX, VEEV, COST
Trading Shorts: LRCX, VNQ, M, KSS, AVB, HPT, BXP, PCG, EIX, WEC, PNW, GGP, PCAR, ITW, BLL, SWK, CMI
Short QQQ at 175.80 up to 178.50 into end of week, expecting reversal and pullback to 163.
Long SPY Target at 280.55. Stops raised to 276.60.
Long XLY Target 111-111.25 - Look to take profits Wed-Friday of this week
Long XLV target at 86.35-.50- Take profits into Wed-Friday just above Monday's highs
Long XLB with targets at 64 and stops raised to 60.27
Long IHI , targeting 207-208 into end of week- take profits in this zone
Long HSCEI at 11575-11650, targeting 12525, and above to 12811
Buy Gold on any daily close above 1309, anticipating a rally back to 1346-1365
Similar to yesterday's thinking, this rally is showing increasing signs of stalling out, and despite indices having made fractional gains, price wise on Tuesday, Yields pulled back hard into the close, and Financials were hit with a -0.50% lows, bringing XLF down to a multi-day low close. Technology has shown evidence of stalling out in recent weeks as its rally has become far less robust with QQQ right near prior highs. Demark counts suggest that peaks could come by early next week in QQQ, while some counts are ready as ofWednesday to sell into this rally. One should consider lightening up on any further rally from Wednesday into Friday of this week, expecting that any further rally will come about on far lower breadth, participation and volume. Tuesday's breadth ended up turning in NEGATIVE Advance/decline data by the close, which was telling . While Healthcare and Discretionary still look to push higher for 2-3 days near-term, and Technology might do the same into end of week, it's wise to be on guard for evidence of stocks now reversing course with prices having pushed up into mid-month.
If this month's pattern echoes that of the last few months, peaks in stocks mid-market might occur yet again, and given negative breadth, with two leading Generals of the SPX, Technology and Financials, starting to show evidence of weakening of late, one should be on alert for some stalling out. As has been mentioned, seasonality and sentiment directly coincide with this thinking for the back half of June to be worse than the first two weeks. While the Fed meeting itself might not serve as the catalyst, as a rate hike is expected, the guidance and the resulting move in the bond market needs to be watched carefully given that bond yields have largely been leading stocks in recent months.
Additional charts and thoughts below.
QQQ has reached levels that make fading this rally appealing technically between now and early next week. Counter-trend sells are present on weekly charts now along with monthly while Technology has slowly but surely started to lag again following the robust outperformance, not dissimilar from what happened starting in mid-March. For those with long portfolios in Technology, looking to add QQQ shorts might make sense from 176 up to 179 into end of week/early next given signs of negative divergence on weekly charts coupled with bullish sentiment and poor seasonality.
The divergence between QQQ and SPX and Europe's SX5E has grown fairly pronounce in the last few weeks and is something to watch carefully to see whether the world can play catchup to Big cap Tech, or whether FANG Is due for a FALL in the weeks ahead. Given sentiment levels, and yesterday's negative breadth, its not unrealistic to expect initially that QQQ should back off and pull back into late June with an above average possibility of a strong turn also in late July.
The downturn in Financials over the last couple days has also set off alerts as the recent rise in Yields into FOMC has not really brought about any meaningful bounce in the Banks, outside of a few days of gains. Many of the stronger stocks within this sector remain within the Regionals and E-brokers and Exchanges, while the Banks have largely lagged. Given the pullback to new lows in relative terms, this is a sector that really needs to stabilize quickly to have hopes of this rally continuing, and for now is not responding all that well of late.