February 14, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2722-4, 2700-2, 2683-5, 2662-5
Resistance: 2759-60, 2773-5
Wednesday Mid-day Technical Video
My CNBC interview from yesterday:
REPLAY LINK: Thursday Feb 7 Technical Webinar
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SPX - (3-5 Days)- Mildly Bullish- S&P stalled out right at 2760 and remains within a resistance zone now that likely causes a stallout.
EuroSTOXX 50- Mildly Bullish- Closing on target and should stall out by Thursday
HSCEI- Stallout likely after test of last Sept highs. Trend won't be bearish unless 10770 is undercut.
Trading Longs: PGR, XRAY, HIIQ, MPWR, IYT, XLF, GLW
Trading Shorts: XLK, TLRY, EEM, DBC, HAE
Overall yet another positive day with Transportation on the verge of a larger breakout, while Financials show some decent follow-through after the recent move above the downtrend that's guided this group since last Fall. Still no meaningful evidence of stocks starting to turn down, yet Technology has now gotten to levels that are important and it's thought that this group stalls out and reverses course, with money flowing into Financials. As stated yesterday, four reasons stand out to bring a bit of near-term concern about the longevity of this rally.
1) Defensive bias over last 5 days, 2) slowing momentum, 3) Demark exhaustion and 4) TNX, USDJPY diverging from SPX. All of these have the potential to be negative and should be highlighted. The fact that SPX is now above its 200-day moving average is thought to be unimportant, as the last few times this was exceeded, back in November and also December, both times prove to be short-lived and prices fell right back down. Thus as stated earlier, the 200-day is not really that important of a trade indicator as it is a point of reference.
Overall, Technology, as shown below is now up to important levels, whether it be based on Equal-weighted Tech, the SOX, or XLK nearing its own 200-day while showing Demark "sells" . Meanwhile, Financials look to be just breaking out of intermediate-term downtrends from last Fall. While "Fin-Tech" continues to show good strength and the Exchange stocks, others like Berkshire and JP Morgan have begun to show meaningful evidence of strength lately. Thus, it's thought that there could be an upcoming rotation where Technology stalls, while Financials pick up strength. Charts should highlight some of this rotation below.
Long XLF- Expect Financials start to outperform and we see another 2-3 days of absolute rally in the group
Short EEM- Expect pullback in Emerging markets
Short DBC- Expect pullback in Commodities in the weeks ahead
Short VNQ- for Short REIT exposure
Additional charts and thoughts below.
Equal-weighted Technology got right up to prior highs and has since begun to stall out in recent days. This chart highlights the SPXEWIN , or Equal-weighted Technology index, vs the SPX. Relatively speaking, the breakout late last year was instrumental in helping this continue higher, but at current levels, it looks like a poor risk-reward near former highs, and likely slows. This could affect the SOX (which looks to have maximum upside to 1385-1400 ) and XLK which could stall out at current levels. Overall, while Tech had been bullish last year and fell out of favor, the recent rally has been impressive and we'll see the extent to which this Tech rally stalls out. The Semi names might face more downward pressure than FANG.
NYFANG, the Bloomberg index for the so-called "FAANG" names within Technology, remains trending down since last June. Last week's peak in this group in the very short term was higher than the last couple days, showing the extent that FANG has not really participated in the rally of late (Facebook, Amazon, Apple, Netflix and Google (Alphabet ) While a breakout of this downtrend would certainly be bullish, the near-term is more choppy and neutral and has not allowed for any real strength.
Financials showed evidence of breaking out of this entire downtrend from last September yesterday. This looks to be an important and bullish development from this group which has lagged for months. The absolute charts have begun to look more bullish, while the relative charts have stabilized and made minor breakouts in recent days. One should overweight stocks like V, MA, along with JPM, BRK/B.