January 29, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2622-3, 2612-3, 2606, 2590-2, 2574-5
Resistance: 2653-5, 2672-5, 2685-7, 2700
Monday Technical Video
REPLAY LINK: Last ThursdayTechnical Webinar- 15 min
SPX - (3-5 Days)- Mildly Bullish- Despite Monday's weakness, prices rallied into the close, and even on post close declines, have not yet broken areas to turn bearish. Hourly charts still resemble a triangle pattern and we'll need to see movement under 2622 to have bearish leanings and then under 2612 would be more definitive.
EuroSTOXX 50- Bullish- Rallies up to 3200-50 look possible before this stalls. Under 3094 necessary to change this trend.
HSCEI- Stallout looks likely up at 11000-11100 in next 3-5 days. Prices have moved a long way very quickly since early Jan, but this area has had significance since last July and has to be respected. For now, Trend won't be bearish unless 10550 is undercut but one should sell into 11100
Trading Longs: DATA, EVBG, CCI, VTR, WELL, PLD, FOX, NOW, TECK, ARNA, MRK, LLY, REGN, RH, TWTR
Trading Shorts: ILMN, VOD, AMGN, PCAR, OLED, IWM, CE, ROP, GWW, SWK, AAL
Equities pulled back sharply Monday on earnings and guidance concerns of some very important companies like Caterpillar, and NVIDIA, with Semiconductors experiencing a vicious about-face from their recent strength last week. Overall, Technology sold off the most of any of the major 11 sectors, yet breadth remained somewhat tepid, and failed to register any type of levels of concern. Prices managed to hold last Friday's lows, failing to breakdown sufficiently to think a pullback is upon us. However, this triangle pattern has very well defined levels of risk, so any violation of 2612 would put a selloff back on the front burner and particularly under 2596 would be a negative.
Bottom line, more needs to be done to suggest a correction has arrived. While charts seem to paint a very poor risk/reward with prices up near critical resistance, and cycles suggesting the possibility of a decline into mid-February, structurally we haven't seen sufficient weakness. Financials have been acting very well lately and Technology as well, despite yesterday's pullback. Most of Europe and Asia remain in near-term uptrends, so more will need to happen to expect stocks are turning down. This week should help solve this dilemma.
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.
S&P looks to have formed a triangle pattern, which bodes well for buying into dips on Monday's close, with a very well defined area of risk at 2622 and under at 2612. Gains back above 2671 argue for a push up to the more important 2700-2715 area before stocks stall. For now, it's difficult to be all that bearish on trend, despite the many reasons for concern and ongoing uncertainty. Minor pullbacks have held where they need to thus far. While prices did in fact look to peak out near important one-year anniversaries, we'll need to see more weakness to argue for a larger pullback. The next 2-3 days should decide the course of action here. Stay tuned.
2019 has started off showing some classic mean reversion, as the worst performing sectors for last year are currently leading the pack. This 12-month performance table shows Energy and Financials right at the bottom, both losing over 14% in the past 12 months. Since that time, however, we've seen both groups turn higher and lead performance this year, which is traditionally something to expect from lagging sectors heading into a new year. Financials now leads all sectors with three more days in the month of January and relatively speaking has broken out vs the SPX relatively. This should mean on pullbacks that this sector is one to consider buying for outperformance in the weeks ahead.
XLI has rallied to very important resistance near-term, not unlike the same area that S&P, DJIA and NASDAQ are dealing with. In the short -run, the odds are that Industrials fails at current levels given the presence of four-month trendline resistance coupled with resistance near former trading lows which have been important in XLI since late 2017. This area lies near 71-71.50, and until/unless exceeded, it's right to consider this to be strong overhead resistance to gains. The act of getting back above 71.50, however, while an alternate scenario, would drive this higher to the mid-70's.