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NASDAQ on brink of violating entire trend from April as SOX turns down

September 7, 2018
Mark Newton CMT, Newton Advisors, LLC- Contact: info@newtonadvisor.com

S&P 500 ETF Trust SPDR (SPY)-  
286.5, 283, 281    Support
290.45, 291.16-19         Resistance


LINK TO TECHNICAL WEBINAR from Wednesday, 9/5:  https://www.youtube.com/watch?v=WwyKpRK1hR4&feature=youtu.be

 

SPX - (3-5 Days)- Bearish, pullback got nearly to the first target, and there is some trendline support here which has spanned the last few months, but breaks of this look likely in the next few weeks, with Downside targets near 2807.

SX5E- EuroSTOXX 50Bearish- SX5E now within striking distance of March lows at 3261, but this might hold just temporarily before a breakdown under.    Overall,  Short/avoid, expecting this recent weakness to persist, and to underperform S&P

HSCEI- Bearish- Move down to test 10359 likely with additional targets found near 10200.  Near-term, additional weakness is likely and shorts recommended.  


Trading Longs: JNJ, HD, PM, CLX, CHD, HRL ,HSY, NEP, EXC, NRG, ES, ETR, 

Trading Shorts:  FB, FEZ, VGK, TUR, MU, NFLX, NTCT, CQQQ, EEM, DBC, MHK, WHR, HIG, GT, HBI, BWA, LVS, CVS, AMBA, AVGO, SF, DE, ITW



TECHNICAL THOUGHTS

US Equities look to be finally joining the selling seen in most of the world, yet the majority of weakness is still coming from Technology, definitely an important area, but not as much yet out of other sectors like industrials or Heatlhcare.  Financials were down yesterday, so the selling looks to be gaining some momentum, but yet indices like the DJIA still look in good shape technically and have not really weakened.  Further deterioration in Treasury yields next week to challenge and break 2.806% would help Financials join some of the selling seen in Financials, and create more volatility for US equities overall.   For now the balance of the selling is still largely abroad, with Asia and Europe leading down, while the US continues to trade a bit better, despite trading lower in recent days.  

Yesterday brought about more pronounced selling in Semiconductors, yet still not much in DJIA , and this chart is vey different than ones being seen in the NASDAQ, and most certainly much better than Europe, with SX5e and DAX having broken down.  While SX5E and NASDAQ look to be near important levels, this market continues to have a defensive tone and it's still right to avoid and/or consider shorting, thinking little rally is likely ahead of 9/9-9/21

ACTION PLAN-  

Short XLK at 75.75, with targets near 72.50
Long XRT with target at 54
Long XLU with targets at 55
Long XLV with targets at 95, 100
Long XLP with targets 54.60-55, Stop at 52.95
Short EURUSD with targets 1.15


 

Additional charts and thoughts below.

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NASDAQ 100 has now weakened by more than 200 points in the last five trading days, selling off to test meaningful trendline support from late March.  Given the weakness in SOX as well as XLK having begun to weaken but not yet at support, it looks likely that NASDAQ does in fact break support in the coming weeks and would represent the first real weakness in the indices to violate multi-month support.   Overall, a rally is necessary for the bulls nearly right away and any failure from here would argue for a move down to test the lows seen in late July just under 7200.   Bottom line, additional weakness out of Technology looks likely, and it's right to avoid Tech and avoid the NASDAQ for the next few weeks. 

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Semiconductor stocks made meaningful weakness Thursday which suggests additional downside Friday into next week before this finds any bottom.  Yesterday's selloff stripped nearly 2.7% off the index, causing weakness to greater than 10 day lows.  Pullbacks to near 1325 look likely for SOX, so any rebound attempt Friday should be a shorting opportunity for a further pullback in the weeks ahead. 

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A strange market these days.  Indices like Europe's SX5E or the German DAX have accelerated lower to new monthly lows, while Emerging markets have been hemorrhaging.  Technology seems to have finally begun to peak out.  Yet the DJIA finished positive yesterday and the chart is still quite constructive with prices having made new four-day closing highs.  It's thought that much of this global selling should affect the DJIA as well and as Industrials and Financials start to join Technology that the DJIA weakens, breaking 25805 from earlier this week.   This in turn would cause roughly a 400-500 point decline to more meaningful support, but might be delayed until next week and/or the following.  Overall, stocks like HD JNJ, KO have all held up admirably this week, and until we see DJIA weaken, this remains a better long vs some of the weaker indices and certainly vs Europe and Asia.