June 7, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: firstname.lastname@example.org
S&P 500 ETF Trust SPDR (SPY)-
275.82, 275.09, 274.24 Support
278.25, 279.10, 281.53 Resistance
LINK TO TECHNICAL WEBINAR from last Thursday: https://stme.in/Z1TiZuapkS
SPX - (1-2 Days)- Bullish, but do not expect SPX will exceed January highs without stalling out and pulling back into late June. Move to 2793 up to 2802 is likely and time-wise, looking at FOMC meeting as a chance to take profits and sell given Demark lining up next week and sentiment. Under 2718 would be a concern.
SX5E- EuroSTOXX 50- Mildly Bullish- The rebound from early lows should lead to a bit more strength up to 3520-30, so its likely that the next couple days continue to show further upside. Any move back under 3389 would allow for a full retest of 3261.
HSCEI- Bullish- Rally to 12525 likely into next week. Bounce ongoing and expect Dollar weakness leads this higher
Trading Longs: FDC, PX, WPM, GRUB, LYB, KKR, BAC, XLF, MRK, GILD, LPNT, ORLY, HCA, LHCG, EBAY, WU, PGR, BAX, COST, FDX
Trading Shorts: AVB, HPT, BXP, PCG, EIX, WEC, PNW, GGP, PCAR, ITW, BLL, SWK, CMI
Long SPY Targets raised to 282
Long QQQ, Targets raised to 177.50-179- Stops under 173
Long XLY with targets raised to 111
Long XLB with targets at 64 and stops under 59
Long XLF with targets 28-28.50
Long IHI w/ target raised to 210, and stops at 200.78
Long NYFANG index @ 2730 with targets raised to 2975 and stops raised to 2863
Long HSCEI at 11575-11650, targeting 12525
Buy Gold on any daily close above 1309, anticipating a rally back to 1346-1365
The move in Equities higher continues to be more positive from a price perspective than it is from a volume or breadth standpoint, and investors are jumping aboard this rally given Equity Put/call data sinking quickly. This ratcheting up in sentiment coinciding with breadth coming in far less than idea levels (Less than 2/1 positive yesterday) means that equities are unlikely to carry through the month of June without any blemishes. As has been reported, the month of June is seasonally quite weak, the weakest of the year in Mid-term election years, so the 2.48% gains in S&P and 3.32% gains in NASDAQ thus far aren't likely to be sustained. Cycle dates along with Demark counter-trend exhaustion signals key in on next week for being important, which just coincidentally lines up with this month's FOMC meeting, so it's likely that this move stalls out within the next 3-5 trading days. One should consider taking profits in Tech stocks for those that are tactical and not long-term in nature, and considering Materials instead and/or the Metals for an upcoming bounce.
3 key things are happening near-term that are important for the market. 1) Yields have snapped back higher, giving a rise to Financials 2) the US Dollar has begun to peak out which has allowed for some stabilization and bounce in EM equities and currencies, and 3) Commodity stocks have begun to show strength as per Materials gains in recent days, which has been partly due to base/industrial metals strengthening. These trends are important, but one needs to focus on 2 key things for the next week: Whether or not this Tech rise can continue and NOT stall out near former highs (which seems unlikely given the sentiment, and whether or not the Financials move is also for real (Also unlikely given massive Short Treasury bets by Non-commercial Specs) For now, the trend in equities has continued higher, though warning signs abound.
Additional charts and thoughts below.
S&P has pushed through resistance near 2741 as of the last couple days, and yesterday's pickup in Financials was thought to be a positive at a time when the market has been sorely lacking leadership outside of Tech and Retail. The two worries concern Technology reaching areas of resistance where this should stall out, while Put/call data has become dangerously low, as Equity put/call data has dropped to levels which marked the January peaks. Call buying en-masse by investors and being correct immediately does not typically go hand-in-hand, and the breadth accompanying this move is less than stellar (if yesterday's <2/1 Upside breadth was any gauge) While Financials bouncing is thought to be a positive, it's unlikely that this sector is experiencing any more than just a bounce which will stall out post FOMC meeting next week.
Yields turning back up above 2.93% was a positive for US and German Yields and served as a source of stabilization for the Banks which managed to jump higher and outperform after numerous signs of momentum lagging of late. While the act of regaining this uptrend is a positive for Treasury yields, the degree to which investors continue to bet that Rates are going higher, though CFTC Treasury shorts is a concern for this view, and likely means that rates stall out and reverse back down after FOMC next week. For now, additional upside above 3% up to near 3.05% looks possible for yields in the next few days before stalling out.
XLF advance today given the Yield snapback showed Financials attempting a bounce after nearly four months of underperformance. Near-term gains look likely in XLF, BAC, JPM after many of the Money-center banks and Financials group as a whole had underperformed, and specifically had lagged the Regional Banks. Upside targets lie near 28.25-28.50 into next week, and this is thought to be a short-term bounce only, not the start of a meaningful shift higher in Financials. One should utilize this bounce to sell into this group by end of week/early next week.