February 22, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2768-9, 2758-9, 2731, 2722-4
Resistance: 2788-90, 2798-2800
My CNBC interview from Wednesday 2/13
REPLAY LINK: Thursday Feb 21 Technical Webinar
SPX - (3-5 Days)- Still Bullish into Friday/Monday of next week. but skeptical that S&P gets over 2800- Thursday failed to close down enough to suggest a downtrend had begun. Will need a close UNDER 2737 to pay attention on the bearish side, and for warnings, an hourly close UNDER 2766, which held on Thursday
EuroSTOXX 50- Bullish- Move to 3300-3350 looks likely. Will need a move UNDER 3124 for confidence in the bearish case.
HSCEI- Bullish- Target 11450-11500 into early next week- Prices have pushed higher and still looks early now for a peak
Trading Longs: CLX, CHD, FTNT, BK, FXI, SBUX, UNG, GBTIF, HARV.CN, CRM, ALB, DWDP, WATT
Trading Shorts: UUP, EUO, AAL, SYMC, SNPS, CTSH, TRIP, K, FRT, HAE
Thursday's selloff was moderately recouped by yesterday's close, with no real damage having been done. Prices failed to take out the prior days' lows, and remain well over 2729-37, a downside area of support which when violated would give way to further selling. Breadth was only mildly negative at 3/2, and we saw Technology eke out small gains on the day. While Energy might have been thought to be weak, it's really Tech and Financials that are important to watch at this stage of the rally. Software and Semis are both getting close to resistance, and I do expect a stalling out here, as well as in Financials but should happen closer to $27-$27.15 to take profits into, either today, or next Monday on gains. The last 7 of 8 Friday's have been positive, as one might expect during uptrends like we're experiencing. Thus, unless we see prices UNDER 2766 early, which held on hourly closes on Thursday, it's still right to believe that a bit more upside can happen.
Overall, some mild evidence of the Defensives starting to stabilize here after last week's pullback, and that's one thing to keep an eye on. Also, some pretty dramatic swing back higher in Treasury yields which had been largely range-bound for the last week, but made a fairly robust 4 bp rise (10yr) yesterday, breaking minor trends, and arguing for potentially a larger bounce. The Dollar bounced yesterday after several sharp down days, and Gold fell. However, Precious metals have indeed improved, and this pullback should likely offer buying opportunities in the metals given recent upward momentum. Charts below highlight S&P, Software, and Natural Gas, which looks to be potentially trying to bottom after having been nearly cut in half in the last couple months.
Long GDX- Target 25- Use Thursdays' pullback to buy, Friday or Monday
Long XLB- Materials starting to outperform- Push higher to 56.25 initially possible and then low 60s
Long FXI- China on the verge of a larger base breakout - Long here and add above 43.65.
Long KRE- Given the breakout in KRE, this should outperform XLF and also SPX, and its right to be long
Short VNQ- for Short REIT exposure, though a move above 85.25 on a close should not be added to as this would allow for 86-86.25 before stalling into end of February and then turn back lower
Additional charts and thoughts below.
S&P looked to be on the verge of possibly starting a minor selloff, yet held where it needed to and rallied back moderately to escape the day with only a minor loss. Additional rallies can't be ruled out here given the lack of deterioration and trend break (S&P held 2766 on an hourly basis, which was discussed as being important) and Friday's have been notoriously strong in the last couple months. However, on this go-around, a push higher to 2800 into today's close or Monday would have more technical evidence to suggest selling into, given the factors of Technology stalling, coinciding with counter-trend exhaustion. As always we'll be on the alert for a break of 2766. For now though, it still might be a tad premature if these signals have any importance.
Software looks to be on the verge of stalling out, as the IGV (Ishares Expanded Tech-Software Sector ETF) has hit former highs and shown more and more signs of this area being serious resistance in recent days. TD counter-trend signals are in place and prices look to be arguably trying to break the uptrend of the last couple months. Stocks like MSFT made sharp gains Thursday, though look to be coming into resistance, while a few others like FTNT, CRM, still look attractive to further gains. However, this sector has its share of laggards to avoid/short technically, like SNPS, CTSH, SYMC that are either at former highs or have begun to rollover and might make more sense for some to short, than looking at IGV.
Natural Gas is starting to show some minor evidence of lifting off recent lows, something that should cause many to pay attention given the nature of this so aptly called "Beast" NG has been nearly cut in half over the last couple months, so the March contract getting up above the downtrend from highs definitely sparks some interest in this as a long. Generic weekly NG charts look to be finding strong support near where they bottomed over the last couple years. While this might be a "two-steps forward, one-step back" process, there's enough there to suggest small longs here technically , looking to add on weakness. UNG is the ETF for Natty which might appeal to those not involved with futures.