January 24, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2612-3, 2606, 2590-2, 2574-5
Resistance: 2653-5, 2675, 2685-7, 2700
SPX - (3-5 Days)- Bullish- Thought that it's right to buy into yesterday's weakness, as there wasn't sufficient weakness to expect immediate downside and better to sell rallies at 2685-2700 into 1/26-8
EuroSTOXX 50- Bullish- Rallies up to 3200-50 look possible before this stalls
HSCEI- Mildly bullish- Rally to 10900 now possible. Stallout did not result in any meaningful weakness and could still push higher.
Trading Longs: EXC, PNW, MRK, ABT, LLY, REGN, RH, DATA, EVBG, RMD, TNDM, TWTR
Trading Shorts: MAR, H, STX, OSTK, IWM, XRT, CE, ROP, VOD, LVS, GWW, SWK, AAL
No real change in thinking give the second straight day of closing well up off early lows. S&P's 3-4 About-faces in the last 24 hours gives some concern to many who wish to see this volatility die down, and it continues to be an environment where short-term news is certainly coinciding with many reversals, regardless if it turns out to be true or not.
Yesterday's ability to hold early losses and grind higher, yet again, for the second day in a row does give some optimism that this trend is still very much intact in the near-term. Gains look more likely than losses into end of week and early next week before resistance sets in. Semiconductor earnings post close seem to have helped prices extend in stocks like TXN, LRCX and XLNX, and while this sectors underperformed in Wednesday's trading and looks to be up near key resistance, Technology overall has been acting much better, and potentially today's trading could help provide the necessary strength that this sector needs.
One thing is for certain however: Small-caps have been turning down pretty rapidly in the last two weeks and yesterday, yet again, saw IWM down, while SML lower to the tune of 1.6%. Note that Small caps peaked out last June when Technology did and it was the late August peakout in NASDAQ composite that coincided with nearly a full month of negative breadth before the broader market peaked. This will be something to watch carefully in the days/weeks ahead. However, this negative has to be weighed vs a Financials and a Technology sector that both are acting better than would be expected in a volatile "down" tape like we've experienced.
Short US 10Year Treasuries, expecting yields rally up to 2.81-3% for 10-Year Treasuries
Long SPY with stops 259.96, expecting possible rallies back to 268.50-270
Long Crude oil on Tuesday's weakness, with movement up to $55-56 likely in the week ahead
Additional charts and thoughts below.
S&P severed several uptrends and downtrends before settling in at levels above yesterday's close by nearly 8 ticks and rose post close on good earnings by several Semi names. Gains look likely in the days ahead, barring a close under 2612, and the ability to clear 2653.75 would be an area to consider buying for gains up to at least 2685-6. For today, there is a bit more confidence given two straight days of reversals off early lows, and it looks right to expect a bit more strength into 1/28 before indices stall out.
Semiconductor stocks appear to be at a critical crossroads vs Technology as a whole, and after the two month rally, this group stalled out over the last few days, and particularly has done so vs Hardware. However, post close earnings yesterday from TNX, XLNX, LRCX were good enough to lift futures post close, and as can be seen above, Semis look to be at resistance now of the entire downtrend from last Fall. Any ability of this to be broken would be a vote of confidence that could help this rally extend a bit more into end of week and into early next, helping the SPX achieve its target of 2700.
Don't look now, but Financials appear to be on the verge of a larger sector breakout relatively speaking. This group has taken the lead in recent weeks to now lead all other 10 sectors in performance for 2019. The ability to break out of the entire relative trend for XLF to SPX going back since early last year would be a good vote of technical confidence that this group might finally begin to start strengthening in a manner that would help the broader stock market, regardless of the poor technical structure, and is something to be watched carefully in the weeks ahead.