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S&P, NASDAQ near resistance, while Financials, industrials play Catch-up

August 28, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
289, 288.50, 287, 285.43,     Support
290.22, 290.67, 291.16-19    Resistance


LINK TO TECHNICAL WEBINAR from last Thursday- https://www.youtube.com/watch?v=3gkpjm_QUZM&feature=youtu.be

 

SPX - (1-2 Days)- Bullish, but very stretched here, momentum quite overbought on intra-day basis.  Overthrow of Trend might lead briefly to 2915-8 before stallingTuesday/Wednesday-  Stops on longs at 2876- Risk/reward favors selling into gainsTuesday/Wednesday - Upside does appear limited

SX5E- EuroSTOXX 50- Bullish, and if 3460 is exceeded, this might make another 3-4 day rally into 3500 before peaking, but it's unlikely that late July highs are exceeded, and one should be on the lookout for any reversal in the next few days.  Movement uner 3404 should lead down to 3340 initially near late June lows.    

HSCEI- Mildly bullish with targets to sell near 11400.   Prices have stalled near 11150, but Demark counts look to allow for another 2-3 days of gains before this stalls.     

Trading Longs: MPC, ANDV, VLO, C, GS, KSU, UNP, INCY, HUBS, SAIL, ABT, HOLX, NKTR, IDXX, SWN, GRMN, MYGN, TOWR, TEAM, NEP

Trading Shorts:  DSW, MHK, WHR, HIG, GT, HBI, BWA, LVS, CVS, AMBA, AVGO, SF, FEZ, VGK, DE, ITW



TECHNICAL THOUGHTS

Reversal possible Tuesday/Wednesday, but wait for the pullback to new 2-3 day lows before having any sort of conviction that a top is in.   S&P Futures have upside targets at 2916-9 for the next few days that would make for an excellent risk/reward to sell into.   Overall, Upside limited, but wait for the break before assuming shorts-   Buying Implied Volatility makes sense for September- 

The trend has grown parabolic in recent days, and we've seen evidence of Financials and industrials ETFs breaking out to attempt to close the gap.  Breadth came in at less than 2/1 positive, and volume was tepid, yet we've reached a stage of the rally where most feel sheepish expressing any sort of a bearish opinion heading into a very tough month seasonally.  Bond yields haven't really spiked sufficiently, or has the yield curve steepened to offer too much of a bullish outlook on Financials, but yet movement in both XLF and XLI, if it holds (and it didn't hold in early August) would be constructive to think these two sectors likely play catchup.   Technology, meanwhile, is nearing key resistance for XLK after its own recent breakout, and SPX, NASDAQ Comp along with a plethora of other indices are starting to line up to show counter-trend exhaustion for the first time in the last couple months.  This could be important but yet, given the parabolic acceleration, it's a must to wait for the reversal before attempting to short into this, unless S&P were to reach 2916-9 into Tuesday/Wednesday which would be a technical "Green light" to consider shorting.  

ACTION PLAN-  

Long XOP with targets at 45.50
Long XLU with targets at 55
Long VNQ with targets at 85.50
Long XLP with targets 54.60-55, Stop at 52.95


 

Additional charts and thoughts below.

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The SPX has now exceeded the upper barrier of the four-month channel consolidation, something that makes further upside likely very tough to come by.  Intra-day RSI readings were showing near 90 while counter-trend Demark based sells should finally appear in unison as of Tuesday/Wednesday in a multitude of indices and sectors, arguing at the very least, to pay attention given such stretched conditions.  Overall, upside targets lie at 2916-9 while breaks of 2874 would turn the trend bearish fairly quickly for a move down to 2800 and below.  Arrows above price on the 240 minute charts show the TD Sell setups which have been present at former peaks and yet again are present after this big surge higher.  While it's tough to fight prices in such a steep uptrend, one has to be on the lookout given such overbought conditions near-term amidst a pattern of counter-trend exhaustion starting to appear.  

The minor breakout in $XLF yesterday looks bullish, but it's a must to show some evidence of followthrough this time around, a similar breakouts failed to hold back in early August.  Stocks like C and GS both look positive for further near-term gains. However, it's important to mention that many of the Regional banks are not participating and charts of KRE and KBE look far worse than XLF.  Stocks like FITB, ZION look better to avoid/short technically, while some of the Brokers look to extend.  

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 The NASDAQ Biotechnology index looks set to make at least a minor new high given its technical setup in recent weeks.   The act of exceeding 120 would be important given that this level also coincided with peaks made earlier this year.  Gains to near 125-130 look possible, but might prove short-lived given the counter-trend exhaustion seen now on weekly charts.  While larger in scope than many of the Small-cap stocks that make up the IBB, stocks like INCY, ALXN, GILD, and CELG all showed excellent technical structure of late and evidence of trying to turn higher over the last few days.