January 15, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2560-2, 2552-3, 2524-6
Resistance: 2598-2601, 2608-10, 2623-5, 2630-9
SPX - (3-5 Days)- Bullish - Insufficient weakness Monday to turn bearish & prices unchanged over last 3 days. One final push higher looks possible to 2630-40
EuroSTOXX 50- Mildly bullish for 1-2 days for a final push above 3100- Area near 3150 important and trend reversal likely into next week
HSCEI- Mildly bullish- Rally to 10540-10600 possible but upside limited this week
Trading Longs: TWTR, XRX, AVGO, LLL, FITB, NOC, UPS, ROKU, RMD, CTB, CHD
Trading Shorts: ED, AES, NEE, GWW, SWK, XBI, XRT, STX, AAL
Bottom line- A tricky area for US indices. Technically upside should prove limited. However, we haven't seen sufficient weakness to think trends are turning down just yet. Prices closed at similar levels that were hit last Wednesday, so the last three days have been literally unchanged in net progress for either direction. Given that Financials have strengthened a bit in recent days, while Equal-weight Technology has begun to act better, I'm willing to lean long heading into Tuesday, but with close stops at 2560 on a daily close. Provided that S&P remains above this level, one should have a long bias for the next few days, expecting that this consolidation is resolved to the upside near-term before any greater stalling out and possible retest.
Key to mention is that Crude oil along with US Treasury yields and US stocks have all stalled recently, though with greater signs of pullbacks beginning in the former two, with Crude and TNX starting to turn lower. For equities, the pressure in stocks like AAPL has served to mask some of the strength being seen in this sector lately, and stocks like NVDA, ADI, SWKS, XRX, MCHP, AVGO are all higher by 4.50% or more in the last five days
Many Industrials stocks showed decent strength yesterday with favorable short-term patterns in NOC, UPS, LLL, while the Utilities fell to multi-day lows given PCG's bankruptcy filing, and other Utilities like ED, AES, NEE also showed real weakness on this news which might cause further underperformance in this sector over the next few days. Overall, the combination of strength out of Financials and broader Tech while Industrials are hanging in, and Healthcare has weakened down to key support all suggest that it still might be tough to fade the market on Tuesday heading into Wednesday. Yet any further push to new highs likely starts to bring about negative divergences that should make any further rally sellable into late week.
RUSSELL 2k FUTURES are a short at 1475 up to 1500, but this area could be tested into next Monday/Tuesday before reversing. Any shorts from yesterday have to be given leeway up to 1500. Targets lie near 1250
Short XBI with stops above 85.50
Short XRT- Early break yesterday which rallied back- Short movement over 44 to 44.75 with targets down near 41.60
Long Treasuries, expecting pullback under 2.60
Additional charts and thoughts below.
S&P has largely gone nowhere since last Wednesday with S&P closing within three points of levels hit back on 1/9/19 last week. The uptrend for S&P Futures, as shown above, remains intact with no discernible break. Additionally, upward pressure in the broader Tech space, Industrials and Financials were all positives for stocks Monday, despite the minor downdraft. Bottom line, until/unless stocks close under 2560 in SPX, it's still right to expect this neutral trend in recent days to be resolved higher. Above 2595 adds conviction, and drives prices to 2630-40.
Financials managed to push back higher to new multi-day highs yesterday, something which helps this group in the short run, given Citigroup strength and seeing some of the bounce in some of the Regional banks. Overall, this might serve to help provide a minor tailwind for Stocks over the next few days, though strong overhead resistance looks to be directly above at $25 for XLF. But this looks to be a factor which might prevent Stock indices from immediately falling just yet, and the next 1-2 days should be positive for Financials as earnings season has gotten underway.
Technology has shown some broad-based strength in recent weeks, despite the ongoing weakness in AAPL. We've seen stocks like NVDA, AVGO, SWKS, ADI, MCHP, PAYX, all move over 4.5% higher in the last week, and the Equal-weighted Technology index, SPXEWIN, in relative terms to SPX has broken out of a trend going back since June. This should be a positive for Technology for the weeks ahead and potentially into Spring/Summer. So while near-term upside might prove minimal for indices after this move, it's likely that this group's outperformance might keep any further drawdown to a minimum and provide buying opportunities for the market on any consolidation into late January/February.