July 20, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: firstname.lastname@example.org
S&P 500 ETF Trust SPDR (SPY)-
276.28-.52, 275.62, 274-274.50 Support
281.45-50, 282.40-5, 283.75-284 Resistance
LINK TO TECHNICAL WEBINAR from yesterday- https://stme.in/lnSOjY8ZbO
SPX - (1-2 Days)- Disjointed market where NASDAQ, DJIA likely to take the lead in pulling back, but where S&P very well might hold up a bit lower. A bullish view on SPY still makes sense barring a close under Tuesday's lows, which turns the trend immediately negative. However, I think its just a matter of time, and even if markets hold up a week, there should still be a correction approaching, so gains should be used to sell into if given the chance.
SX5E- EuroSTOXX 50- Mildly Bullish- Still a bit early to turn bearish, as Thursday'sminor weakness didn't take out prior days lows and a mildly bullish view is right until there's a close back under 3430
HSCEI- Mildly bearish- Expect another 3-5 days of weakness before this reaches support and bottoms with key areas at 10200-350 to buy dips next week on further pullbacks.
Trading Longs: KFY, ETSY, TJX, FIVE, LULU, M, TIF, BAX, WING, PANW, TLYS, CPB, ACN, WIX,
Trading Shorts: VOD, VIAB, NFLX, FB, AMZN, BBT, BK, FITB, EBAY, XLK, OIH, MDR, SMH, AMBA, PCAR LRCX, EWJ
Long XRT with targets at 52, with stops at 49.50
Long XLP with targets 54.60-55, stopping out under 52.07
Long XLV , raising target to 88.50, and raising stops to 86.35
Short XLK with targets at 70-70.50 and stops above 73.03 on a close
Short XLF with targets at 26-26.50 and stops above 28.20
Short SMH with targets at 96.10 & stops on shorts at 107.84- Press shorts under 103.71
Looking to buy Gold at 1200-1210 into early next week, and buy GLD at 113.50-114.50
S&P might hold up longer than NASDAQ, as Industrials, Healthcare hold up while Technology and the NASDAQ show weakness into next week. Overall, getting under Tuesday's lows is important for thinking the trend in US indices is turning down across the board. A combined effort by NDX, SPX and DJIA in getting under this weeks lows should provide the much awaited pullback into late July. The next 1-2 trading days will confirm whether next week sells off into end of week, or can hold up a bit longer. However, the selloff looks to be approaching, so holding up would just be a temporary fix.
Not an easy market. After being negative for the last few days into Thursday, it looked likeWednesday's move was bullish enough to hold the SPX up into next week. NASDAQ however, nor DJIA had made any real progress, and both the latter turned down to multi-day lows as of Thursday's close. Treasury yields pulled back sharply while the Dollar attempted to make yet another day of gains, which caused some weakness in Emerging markets after a fairly stable effort lately in the last week. Overall, no real conviction right now until US indices start to show more evidence of reversing en masse under Tuesday'slows (2789 for SPX, 7292 for NDX) Trends for now remain short-term bullish for Industrials and Healthcare while Technology and FAANG stocks in particular, have faltered. However, a selloff does look to be approaching and the trend for 2-3 weeks is bearish, even if stocks manage to hold up for a few days. It looks right to use rallies to flatten out if given the chance while using a close under Tuesday's lows to adopt a more negative stance, particularly on broad-based, higher than average volume decline.
Looking back, breadth finished flat, again, on Thursday, with just a few more stocks advancing than declining. Yet volume was heavier in declining issues to the tune of nearly 3/2 negative. Only Real Estate and Utilities were positive, while Financials and Telecom both sold off greater than 1%. Given that the high flying mega-cap Technology and FANG stocks have begun to show weakness, a pullback now in Financials would result in a serious headwind to stocks. The SKEW index meanwhile has hit the 2nd highest level ever seen yesterday, and has only been above 150 five times total in its history. Thus, investors seem to be readying for pullbacks by buying downside protection. This of course might limit the extent of the move once it gets underway, if many are preparing for it, but yet still important to mention. The VIX meanwhile, has gradually formed what looks to be a base near prior lows and showing some evidence of stabilizing, which likely will result in this rising in the weeks ahead, and implied volatility at these levels looks cheap.
Additional charts and thoughts below.
The XLF looks close to reversing course back lower and its recent mean reversion bounce along with XLI likely should be coming to an end in the near future. Given that this group represents over 12% of the S&P, seeing evidence of this reaching key resistance and stalling out should be a concern to most market participants, and a firm close back over 28.25 is necessary to have any conviction in this turning higher in a bigger way and helping to engineer a broad-based rally. This looks unlikely for now, and Treasury yields made a fairly bearish reversal back lower that argues for yields to trend down further in the next 1-2 weeks with yield targets near 2.76%. Overall, given the negative absolute and relative charts, Financials should be avoided.
FANG stocks took a turn for the worse in the last couple days, and instead of joining the NASDAQ in pushing above June highs a week ago, failed and have diverged negatively. This failure to lead higher into July is one reason this group now stands to underperform given its close yesterday back at nearly 10-day closing lows, and gradually seems to be rolling over. Stocks like NFLX look vulnerable to further near-term weakness, with targets down nearly 40 points near $324, while AMZN and FB also appear like near-term trading shorts as both have stalled and show evidence of upside exhaustion. Overall, while a minor pullback thus far, this combination of Financials hitting resistance while Tech rolls over looks like something to pay attention to.
The VIX has made a new six-day high close, and looks to be trying to bottom out after having based at levels seen back in June and also in May. The act of spiking into late June and then pulling back to former lows makes this an attractive risk/reward to buy dips in implied volatlity at current levels, thinking that the market is underestimating the degree of uncertainty and/or trade tension that lies ahead. In the weeks ahead and particularly into the volatile September/October period, being able to buy implied volatility with the VIX under 13, having nearly been cut in half from early April and nearly 8 points lower from mid-June makes a ton of sense.