July 10, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: firstname.lastname@example.org
S&P 500 ETF Trust SPDR (SPY)-
276.94, 275.99, 274.53 Support
278.73, 279.48, 280 Resistance
LINK TO TECHNICAL WEBINAR from last Thursday- https://stme.in/ZcAsX0tbnS
SPX - (1-2 Days)- Bearish/Cautious looking to sell into gains if given the chance at 2800-2810, expecting at least a minor pullback to unfold in the days ahead and potentially into the next key turning point at end of month, near July 27.
SX5E- EuroSTOXX 50- Bearish- Prices have reached resistance at 3475-3505, and should coincide with a stalling out and turn back lower in SX5E.
HSCEI- Mildly Bullish, after the breakout of the one month downtrend should lead to higher prices into late July potentially. While the Trump Tariff possibilities might weigh on global equities, one should be bullish unless 10713 is broken as this would result in a retest of 10450 which is more serious support.
Trading Longs: XLP, MRK, XOP, XLE, COP, SM, WPX, LLY, ACN, PLNT, NTCT
Trading Shorts: CB, MS, FITB, VGK, SMH, LRCX, KBE, KRE, EWJ, LB, TSCO, CROX
Long XOP, with targets at 46.50 and then nothing til around 52
Long XLP with targets 54.60-55
Long USO with targets at $16.50
Long IYT, with targets at 192, stop 183.41
Long EEM with targets at 45, stops 42
Long XLV , raising target to 88.50, and taking profits on any close under 85.10
Short XLK at 71.90-72.25 with targets at 70-70.50
Short XLF with targets at 26-26.50
Short SMH with targets at 96.10 & stops on shorts at 107.84
Short HG_F- Copper with targets at 263- Close above 290 is reason to take profits on shorts
Flat as of Tuesday's close, with thoughts that any further lift and/or rally back from post-market Futures decline would create good selling opportunities intoWednesday's close ahead of possible peakout and at least a minor selloff. Targets on longs are limited to near 2805-2810 for S&P and SX5E reached its near-term target at 3475-3505 for Europe.
S&P Futures fell into the close and opened down thereafter in post-market electronic trading, which at the time of this writing, had futures trading down 11.75, or nearly -0.50% while SPX cash managed to finish above June highs, what some might label a successful breakout. However, breadth was flat throughout the session and Financials struggled in trading, closing down on the day while the Defensives rallied back sharply. In fact, over the last 30 days, Utilties, REITS and Staples have led all other eight S&P GICS Level 1 sectors while both Financials and industrials have been down greater than 3%. Not what one expects to hear for a market that many feel is quite resilient. In fact, Technology is just barely positive over the last month, an important point given that Tech was counted on to lead. To be fair, 30 days ago nearly lined up with mid-June peaks and Tech and Industrials have both gained ground in July. Yet, we've seen a real struggle out of both of these groups of late which accounts for nearly 40% of the market and makes it difficult to "join the party" when S&P is at serious crossroads near 2800 which everyone is eyeing. (The fact that this level is so blatantly obvious can create false breakout opportunities, particularly when breadth starts to fail coinciding with Demark exhaustion signals. However, a move above 2810 would in fact be reason to follow, looking to cut losses on any reversal back under 2800.
The real opportunities seem to still be in Energy in the short run, which along with Pharma in Healthcare, have roared back with a vengeance of late. Crude's push back higher inTuesday's trading argues that WTI has a bit to go on the upside before this Summer rally has exhausted itself and its right to be long Crude and long Energy as a sector, while trimming gains in Technology and Financials on any rallies.
Overall, the late day/early evening selloff presents two possibilities. Either futures recover on a lack of Trump additional tariffs being rolled out overnight, and make a minor new high before stalling out Wednesday-Friday, or selling late Tuesday carries over and creates a decline from Wednesday into Friday of this week which in turn likely could be buyable as markets approach the next important turn date, near 7/13. We're open to either scenario, but much depends on whether futures can rally back. At Tuesday's close, there weren't sufficient signals to think a reversal was imminent, but the reversal happened right near the important area of trend change from a price perspective, and just a couple days ahead of schedule. So this warrants a more defensive stance, particularly given the degree to which prices have rallied in recent days.
Additional charts and thoughts below.
Technology has lagged considerably in the last month and it's insightful to see how this sector looks relative to the SPX which has gone largely sideways since mid-June, whereas momentum has fallen off pretty dramatically. Ratio charts of the S&P 500 Information Technology index v SPX shows a very 'sideways' trend, unlike what most would believe is happening with Tech when they hear of GOOGL, FB, MSFT, AMZN NFLX gains. Tech looks to be nearing serious resistance in the short run after nearly 6 of 7 days higher, so one should consider taking profits given near-term overbought conditions as part of a very lackluster, waning trend.
Crude oil has made new multi-day highs yet again after just a minimal selloff opportunity, and further gains look likely technically barring a pullback back down under $72. Gains appear likely for both WTI along with Energy which remains one of the better near-term outperformers in the market, along with Staples.
Consumer Staples has been one of the stronger groups in the last month, along with the last week, thanks to strength in KR, MKC, KHC, PEP with stocks like ADM, MO, CAG, WMT, MNST rallying more than 3% in the last week alone. The near-term trend favors more upside for this group, and should continue to favor further outperformance, while the monthly charts will start to show serious overhead resistance once S&P consumer Staples index reaches 560. For now, this still looks like a sector to favor above Tech or Financials near-term.