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"Shorts kept on Tight leash"

July 18, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
276.28-.52, 275.62, 274-274.50*    Support
280.8, 281.50, 282                         Resistance


LINK TO TECHNICAL WEBINAR from last Thursday-https://stme.in/KWJGLYbh4g

 

SPX - (1-2 Days)- Bearish/Cautious- Expect Tuesday's move was an exhaustive spike, but will stop shorts out if prices don't reverse back lower Wednesday-   Keeping a tight stop on Shorts at 2820 S&P cash, and above this on a close leads to 2841.  NDX stops are 7480

SX5E- EuroSTOXX 50Bearish- No change based on Tuesday  No real evidence of any real progress, and the stalling out should give way to weakness back to recent lows at 3350 and below into end of month.  

HSCEI- Bearish- No change-Weakness in the days ahead likely with support to buy for trading down at 10200.  

Trading Longs:   QID, VXX, VRTX, HCA, PANW, TLYS, KFY, NTCT, XLP, CPB, ACN, DPZ, WIX, 

Trading Shorts:  XLK, XLE, OIH, MDR, IYT, PPG, BMS, OC, PNR, CMI, FLR, GDI, ITRI, XLK, SMH, AMBA, RHT, FOXA, ALK, UAL, PCAR, CB, MS, LRCX, EWJ, LB, CROX


TECHNICAL THOUGHTS


ACTION PLAN-  

Long XLP with targets 54.60-55
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


Markets should be at an inflection point near-term, and expect that gains prove muted before prices turn back lower to give back at least 50% of what's been gained since early July by 7/26-27.

Despite Tuesday's rip back to new highs for NDX and S&P getting over March and June peaks, there remains a small 1-2 day window for a reversal and difficult to chase price as it moves to new highs.   Markets have shown hourly negative momentum divergence, while Transports, Energy have not participated.  While the Healthcare rally has been constructive, Financials are also largely not able to follow through on the move seen on Monday.  So this remains a splintered rally and not one that gives a lot of conviction at a time when breadth and momentum have waned.

Yesterday's move happened on just mildly positive breadth, again something that is cautionary when prices push above former peaks.   The DJIA, which is highly correlated with SPX is nowhere near June peaks, while most of Europe and Asia have been trending lower.  Overall, this makes it difficult to embrace this push to highs, but yet for risk management purposes, movement above 2820 would simply push us to the sidelines until July 26th when a larger cycle is due. For now, its still right to concentrate on being long healthcare, avoiding Industrials and Financials, and watching Tech closely as this sector has given signs of being near a trend reversal. 

Additional charts and thoughts below.

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The NASDAQ has now pushed up to new highs in a manner that will allow its second counter-trend sell signal in a week to emerge, right at a time when momentum has had difficulty in keeping up while Technology has shown increasing signs of stalling out relatively.  I'm not keen on chasing this move back to new highs into mid-July here and still expect NASDAQ to reverse course.  However, this must happen in the next 1-2 days and NASDAQ can't get above 7480 without abandoning shorts and holding out until more proof is at hand.  Wednesday/Thursday should be important for trend reversal and if this doesn't work than a push higher into a more prominent peak at 7/26-7 is underway.

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The turn back higher in the US Dollar in the last couple days has caused Gold to break June lows and definitively violate the lows from last December which arguably also violates the longer-term 2 year uptrend that most have been watching.   Given the short interest now in Gold and the degree of oversold conditions and Demark buys in the last couple days, while seasonality is getting bullish into August, this should be setting up for a trading low by the end of July.  For now, getting under 1350 stopped out longs, but one should look again within the next week, as it looks increasingly likely that Gold should be nearing some formidable support near last July's lows. 

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 For all those that had forgotten about Cryptocurrencies, yesterday's move certainly puts this back on the front burner.  Bitcoin managed to exceed 6800, a level that coincided with two prior peaks as a Reverse Head and Shoulders pattern looked to have been exceeded with the surge above 6800  Near-term targets lie at 8000, and a slowdown is possible after the extent of yesterday's move.  Yet above 8000 would go a long ways towards thinking a push back to 10000 and above should happen, so this area should be watched carefully.