October 10, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2855, 2834-6, 2822-4, 2793-5
Resistance: 2933-4, 2959-60
Thursday Technical Webinar- Today 1pm EST
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Link to Wednesday Technical Video 10/9/19
Link to 10/3/19 Technical Webinar- 20 min overview of Global asset mkts
Link to taped CNBC interview- 10/2/19 on Autos- GM, F
SPX - (3-5 Days)- Bearish- Wed rally on "hopes" of a trade deal failed to make any real progress, and looks like a technical fade- 2933 important (Note: at time of writing, S&P is down 1% on reports that US/China deal made no progress and they're set to leave Thursday)
EuroSTOXX 50- (3-5 days) Bearish- Wed bounce failed to alleviate the ongoing downtrend and pullback to near 3350 looks likely
Trading Longs: RH, REXR, MTZ, TOL, LEN, AAPL, TTEK, VNQ, XLU
Trading Shorts: UPS, FDX, ADS, LB, NKTR, AMCR, RCI, CCL, TECK, HPQ, MMM, F, AAL, ETN, PSX, MJ, HUBS, WUBA, FXE, FXB, LVS, MAR, SUI, PYPL
Wednesday's bounce looks to be largely given back post close, as many of the "reasons" for why stocks might have rallied in the day's session are now being reversed. I'll spare the analysis of my take on US/China only to say a deal never seemed to be possible in the short run, and even a truce would have merely "kicked the can down the road" and wouldn't have had much substance. Breadth finished at a tad under 2/1 bullish, but it was thought to be positive to have both Technology and Financials gain ground. Yields bounced but just fractionally, and didn't accomplish much to alter the current downtrend. Crude attempted to snapback, but ended up back under $53, leaving the recent consolidation decidedly mixed and late trading now showing Crude back under $52.
Overall, S&P has initial support today near 2874 and under at October lows near 2855. Key support for this move, however, as discussed really lies at 2822, the August lows. It's thought that any breach of this level would bring about real acceleration into late October, particularly on or near 10/25, 10/28 for a low on this decline. For now, there isn't sufficient capitulation to call for a low of any sort, and I expect Financials, Industrials and Tech to potentially act negatively if futures hold these losses into Thursday's open. On the upside, if for whatever reason this news is reversed, S&P has strong resistance near 2833-4 and over near 2960. Additional analysis and charts below
Long VNQ with targets at 95 and stops under 91.24
Long XLU with target at 64.50 and stop under 62
Additional charts and thoughts below.
S&P- Wednesday's post close reversal looked important as this undercut prior days lows, and if not regained by Thursday's open, should result in a test of October lows near 2855. This pattern as of now, looks particularly vulnerable to more weakness. However, as we all know, news can change dramatically by the time the market opens. Key to recognize is that Wednesday's rally failed to accomplish much and at the time of writing, has been reversed and could lead to additional weakness.
Technology should be watched carefully in the days ahead for any evidence of further trend failure. The S&P Information Technology index broke down under trendline support and never fully regained the area of importance on its bounce. Thus, while stocks like AAPL continue showing good technical strength, the sector overall has not really recouped what it's needed to in order to have real confidence. Any additional decline in the days ahead might prove particularly weak for Tech, given that this initial breakdown from last week attempted to rally and now looks to be struggling at a key level.
Casinos look particularly vulnerable after violating prior lows which also constitute a violation of the entire uptrend from earlier this year. This particular index is the Casinos and Gaming index, made up of LVS, WYNN and MGM. Without discussing the effects of "no trade deal" on Macau gaming, i'll simply say that the deterioration in this index itself is a concern, and should lead lower in the weeks ahead. Thus, the casino group looks ripe to "short" for aggressive speculators and/or to avoid for investors until this decline has played out.