September 25, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: firstname.lastname@example.org
SPX Cash index
SUPPORT- 2898-2900, 2883-5, 2864-5, 2835, 2817
RESISTANCE- 2937, 2940-5, 2848
LINK TO TECHNICAL WEBINAR from last Thursday : https://www.youtube.com/watch?v=VYeGsALMtp4&feature=youtu.be
SPX - (3-5 Days)- Mildly bearish-S&P made just fractional weakness, but yet again, Sector rotation is at work, erasing gains in Industrials, Financials, while Tech bounces- Market breadth and new highs remain a concern- 2883-6 is key support to breach to turn the trend bearish
SX5E- EuroSTOXX 50- Bearish SX5E given TD SELL SETUP in place now after Monday with its close at 3410.44 and prices still lie in a downtrend from earlier this year, keeping Europe in an underweight situation vs US
HSCEI- Range-bound near-term with highs at 11189 and lows near 10300. Odds favor a pullback now after last week's rally to near the highs.
Trading Longs: ELY, SM, MRO, MPC, XLB, ZFGN, EMN, PX, ZTS, RL, MRTX, TTD, VNOM, OLLI, HD, LOW, NEP
Trading Shorts: GE, AAL, UPS, OC, CMI, JCI, JD, EUO, R, CAR, RHT, ADSK, MNK, AMZN, WYNN, LVS, MHK, VMC, FB, ANTM, AMBA
S&P and DJIA were much harder hit than NASDAQ, which managed to show some stability in FANG issues, with NFLX, FB, GOOGL, AMZN all bouncing from early lows which started right around the market open. However, a net negative day overall for stocks, with breadth coming in near 2/1 negative, and the Dollar and Yields were largely uneventful in showing much volatlity.
It's thought that the market has begun a gradual period of weakening given the pullback seen in Financials and Industrials, with Transports leading as Airlines pulled back sharply. WTI Crude managed to finish over 72, so this coincided with fairly broad-based weakness in many Industrial stocks and caused Financials to erase its recent breakout above four month highs.
While the indices haven't begun to show all that much weakness, some of the breadth gauges are showing alarming readings of late while New highs have begun to plunge. The NYSE new high reading for Monday stood at 44 new highs which is down from 128 seen in late August and the lowest since early August. Addiionally, the 20-week cycle is due to peak out here which last hit in mid-May and prior to that, drove the runup into January when this bottomed in late December. Finally, some evidence of time-based cycles hitting during this week is at hand, with a 90 day projection from late June, 225 day from early February lows, a 240 day period from late January and a 315 day cycle from mid-November 2017. All of these hit this week, suggesting that some type of more meaningful turn is due. Should this be a low? It's tough to rule this out.. but given the degree that breadth and momentum have been slipping of late, it's right to keep a close eye on support trendline areas, which for NDX lie at 7400 and for S&P are at 2883-6 area.
Long XLB with targets at 64 initially
Long XOP targeting 45.50
Long CQQQ with initial target 50.65
Short XLI targeting 76.50 with stops on a daily close over 81
Short XLK, with stops at 76.60, and targets down near 70
Long GDX with target 19.40 initially, then 21
Long EURUSD with initial target at 1.1935
Additional charts and thoughts below.
S&P turned down over the last few days as part of this ongoing uptrend and as momentum gauges like MACD show, we're experiencing "negative momentum divergence" on daily charts with prices having pushed higher, but momentum not following. Overall, pullbacks must violate 2883 before any real concern, but its thought that the reversals in Industrials and Financials look important and are worth paying attention to.
Financials is specifically one of these sectors which was thought to outperform as rates were rising. However, yesterday's pullback moved back under the former area of the breakout, which is normally a warning sign that all is not what it seems. Pullbacks look likely in the short run, and any larger gains in Financials will take some time after yesterday's reversal. Overall, near-term weakness looks likely as many are forced to sell out of gains for those that bought on the expectation of a larger breakout.
The Airline weakness also looked particularly troubling yesterday, and hurt the Transports as the XLI, DJ Transport Average and XAL all made similar moves, breaking minor trendlines in a manner that likely should give way to further weakness in the near-term. Given that Crude's push above 72 shows no real exhaustion and looks to extend to $75 or higher, Airlines could come under further pressure if yesterday's pullback was solely due to fears of Energy moving up. Overall, Airlines should be a group to avoid within the Transports near-term.