January 25, 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
REPLAY LINK: Yesterday's Technical Webinar- 15 min
SPX - (3-5 Days)- Bullish- Still no evidence of any real downturn at work, as multiple selloff attempts failed over last few days, and prices still within striking distance of pushing up to new weekly highs. Best risk/reward is 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: DATA, FOX, YUM, EXC, PNW, MRK, ABT, LLY, REGN, RH, EVBG, RMD, TNDM, TWTR
Trading Shorts: VOD, MAR, H, STX, OLED, IWM, XRT, CE, ROP, GWW, SWK, AAL
Equities have stalled, but yet no real trend reversal and despite the Doubts of a Chinese deal which seem to be coinciding with constant reversals in stocks, only to see these reverse higher by days' end, the trend remains bullish near-term and an increasing likelihood of a final push into 2700 which would signify a better risk/reward to sell into.
Overall, two things give confidence near-term. Technology strength has improved measurably, as seen by the Equal-weight Technology index v SPX which has broken out above the trendline since last June. Yesterday's' SOX outperformance also helped this sector begin to trend higher and turn up vs the group (which was profiled yesterday as being at a key make-or-break. Second, Financials have rallied up to make-or-break levels given Financials strength, and relatively speaking, this group is challenging a longer-term area of serious resistance created last year when Financials peaked relatively. So both Tech and Financials have broken out and/or are on the verge.
A couple things give caution, however. Price structure remains weak and SPX has now rallied 12% into a serious area of resistance. Additionally, prices along with breadth and momentum have stalled out of late. Overall, until 2710 is exceeded in SPX, this remains a counter-trend rally and should be used to sell on any move into 2685-2710. However, in the short run, selling here still looks a bit premature given SPX price action alone. However, Treasury yields very well might have started the new trend on yesterday's breakdown, and this very well might have an effect on the Financials space as it deals with its own possible breakout. The next few days will be key in this regard. Stay tuned.
Long SPY with stops 259.96, expecting possible rallies back to 268.50-270
Long Crude oil with movement up to $55-56 likely
Treasury Shorts closed out Thursday on strength and yield decline
Additional charts and thoughts below.
NASDAQ will have to be watched carefully here as this did manage to exceed the downtrend from October, similar to NDX, CCMP and IWM. Given that technical patterns have improved, it's right to give this the benefit of the doubt until we see evidence of this failing.
Technology has begun to turn sharply higher in recent days, as yesterday's Semiconductor strength helped this group makes some meaningful outperformance. The Equal-weighted Tech index vs SPX shows this recent surge, and should be respected as being important to the overall market given Tech's 20% representation in the SPX. Overall, it's tough turning bearish when Tech is surging higher and this will need to slow down to give any stalling out any real credibility.
CCI index could be on the verge of trying to attempt its own breakout as the US Dollar rally looks to be nearing at least a temporary peak. Pound Sterling has been rallying sharply of late on signs BREXIT might have a second lifeline, while EURUSD looks to be near key support after dismal European data and Draghi warnings on growth had very little downward effect on the Euro. Overall, any signs of meaningful dollar downturn should cause CCI to breakout, giving investors their first buy signal for Commodities of the year. For now this is still premature, but the pieces are in place for a potential turn, so it makes sense to pay close attention.