June 26, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: firstname.lastname@example.org
S&P 500 ETF Trust SPDR (SPY)-
269.10, 268.50-.86, 266.60, 266 Support
273.53, 275.20-50, 276.72 Resistance
LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/y87RQhYBKd
SPX - (1-2 Days)- Mildly bearish, but expect lows should happen this week, likely in the next 1-2 days on further weakness and allow for a rally into early July to occur. Targets lie near 2683-5. The move to 2709 happened yesterday, and many sectors look close to key levels where they can hold and try to turn back positive. XLI, XLB, and XLF have all given evidence of making TD Buy Setups on this pullback, which should allow for some consolidation and/or reversal to this recent downtrend. Doubtful that prices accelerate lower just yet and this first pullback should be one to buy into. After a bounce into July, it's right to assume a more defensive stance, given the extent of the pullback.
SX5E- EuroSTOXX 50- Bearish- Ongoing underweight vs US and weakness has reached the lowest levels since early May, and should allow for another 2-3 days of weakness which potentially can reach 3300 before any low is at hand.
HSCEI- Mildly Bearish, but with support directly under at 10733-5, which if hit, would be a chance to buy this week for a move back higher. HSCEI has nearly given back 50% of its entire rally since 2016, but is getting oversold, while being 1-2 days from generating counter-trend buy signals. Overall, its likely initially that this first pullback should be a buying opportunity.
Trading Longs: ALXN, XOP, HCA, MRK, BAX, PRI, TCBI, V, BJRI, FDC, GRUB, ITT, EMN, PX, EL, GILD, NTR
Trading Shorts: AMD, NVDA, LRCX, MU, HPT, CMI, ADSK,
Short VGK with downside targets at 54.50-55
Cover shorts in Aerospace/Defense, Financials and Materials on weakness today
Look to cover shorts in SPY at 268.50-269
Long XLV with targets 86.85
In the short run, Monday's break likely leads to another 1-2 days of weakness, but could get down to 2683-5 before lows are in place. While Industrials, Financials, Materials look to be near support, Tech should weaken more in the near-term, as the break in NASDAQ represented the first meaningful signs of deterioration in the last couple weeks. While the broader market showed evidence of peaking out in mid-June with numerous warning signs that appeared prior to the Trade war ramping up, now we're seeing the selling become a bit more widespread for the first time since the initial peak. Formerly, only Industrials, Financials and Materials were weakening. After yesterday, investors can say with a bit more confidence that Technology is finally showing some evidence of peaking out more meaningfully. The Nasdaq has now broken the two-month uptrend from early April. While many had hoped that the weaker sectors could bottom out and simply turn higher to join the Tech-heavy NASDAQ, we've seen precisely the opposite with the outperformers like Retail and Tech now beginning to roll over to join the former laggards.
Breadth came in yesterday at some of the more negative that's been seen in recent weeks, with 4/1 bearish in Declining vs Advancing issues, while volume moved into Declining stocks at an even faster level. Sentiment will likely begin to contract quickly given Trade tension building yet again, but sectors like Industrials, Financials and Materials all are nearing key areas of support based on Demark's TD Combo and TD Sequential and really need to make a stand between now and Wednesday to think markets are capable of stabilizing. The combination of both Demark and cycles both suggests this week should be important for a possible change in trend, so it's thought that the sudden start of more serious selling very well could prove short-lived this week and turn back higher ahead of the July 4 seasonally bullish period. Overall, given no real evidence of weakness and/or acceleration outside of the last few days, it's right to use this first move down as a chance to cover shorts and look for a bounce into early to mid-July before thinking further weakness can happen.
Additional charts and thoughts below.
NASDAQ has now officially broken the two month uptrend from early April that had been successful in holding prices up in recent weeks, despite sectors like Industrials and Financials putting pressure on the broader market. Biotech and Technology had been quite bullish in avoiding the weakness up until Monday's trading. So some evidence of mean reversion in this case by the leaders weakening as opposed to the laggards bouncing like many had expected. Overall, further near-term weakness looks possible on a 1-2 day basis, but it looks right for many of the hard hit stocks within Industrials and/or Financials to try to make a stand in the days ahead.
Financials (XLF) have just undercut key support from early May that had held the lows as part of a bigger triangle pattern in the last month. While TD Buy setups are near completion, the violation of this support level does look like a negative until this can be recouped. Movement back up over $27 on a close would be important, and until then, the trend remains weak in this sector but also overdone.
Gold looks close to bottoming after its 100 point decline from two months ago (-7.3%) and the combination of Technical oversold conditions near trendline support, along with Seasonality and finally, sentiment all seem to be important in suggesting an upcoming low. The "safety" trade also looks appealing also given the Trade war ramping up. However, this will need to see some greater evidence of the US Dollar turning down more sharply while yields also fall. For now, we've seen the Dollar begin to turn down. However, Yields have not yet fallen meaningfully and both of these need to work for signs that precious metals, and in particular Gold, can rally. Near-term it looks right to buy dips in Gold on any weakness to 1240-65, expecting seasonal strength up to 1370 which marks the highs of its recent consolidation high.