February 27, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2764-5, 2729-31
Resistance: 2808-10, 2818-20
My CNBC interview from Wednesday 2/13
REPLAY LINK: Thursday Feb 21 Technical Webinar
SPX - (3-5 Days)- Neutral- No change- Some minor evidence of stalling out, though will need more weakness to lean short. Breadth came in flat however, and Demark exhaustion has been completed. For those wishing to pick a spot to sell into the uptrend, we seem to be close yet again to a good risk/reward area. UNDER 2764 on a close is a short signal, and drives down initially to 2729-31
EuroSTOXX 50- Bearish- No change- Right to consider taking profits and adopting hedges after this rally up to resistance 3300-3350, and generating counter-trend exhaustion
HSCEI- Bullish- Expect run-up to 11750-11850- China looks stretched, and HSCEI should hit resistance, stall out and reverse. Yet for now, the uptrend remains intact and still looks to have further to go before making any kind of About-face.
Trading Longs: SRE, PNW, PPL, TOL, ITB, PLNT, SQ, UNG, CLX, LB, DWDP, GDX
Trading Shorts: K, AAP, NBL, HFC, UUP, EUO, M, OSTK, TRIP, CTSH, AAL, SNPS, FRT, HAE, VNQ
Minor stalling out for US Equities, yet insufficient weakness to argue for any real short case just yet. It looks right to flatten out in XLB, XLI and even XLF on this recent push up. yet, Technology has just broken back out to new highs on an equal-weighted basis, so it's important to see some evidence of Tech starting to turn back lower to have any real faith in a market pullback.
Market breadth should be something to watch carefully in the days ahead, as this continues to be flat. Yet with uptrends on stock indices intact and still showing little to no real deterioration, one should be selective, yet still not abandon the bullish case completely, particularly in China which looks a bit more bullish than S&P, or European equities on a 3-5 day basis. . Most weekly exhaustion counts still make the case for another 1-2 weeks before lining up with daily signals.
The Dollar's weakness stands out as the more serious development in the past week, with upward surges in many commodities. Treasury yields have also remained persistently under pressure and the combination should be constructive for many Precious and Industrial metals.
Long GDX- Target 25- Buying dips Tuesday Wednesday 21.880-22.50 for a move back higher.
Long KRE- Given the breakout in KRE, this should outperform XLF and also SPX, and its right to be long
Short VNQ- Expect move to 82 and under would lead to 79.95. Under last week's lows 83.78 should lead to this move
Additional charts and thoughts below.
S&P stalled out on Tuesday, yet failed to show sufficient weakness to mark any kind of meaningful top in S&P- As mentioned, despite the breadth slowdown of late, its a MUST to get below 2783 at a minimum, with last week's lows at 2764 being important to breach to have any real conviction in the Bear case. Overall, while the rally has lost some definite steam of late, the uptrend at this point continues. Longs in Implied volatility look like better bets than shorts until uptrends can be violated in most US indices, sectors and also abroad.
Russell 2000 underperformed on Tuesday which many heralded as the start of a possible pullback. Yet it's important to put this weakness into perspective as RTY v SPX had managed an impressive longer-term breakout above the entire downtrend from last Spring as of the last couple weeks. This bodes well for further intermediate-term strength in Small-caps and argues that any near-term weakness likely should be buyable for additional rallies in the next 3-5 months.
Copper looks to be making a pretty important breakout which has cleared the highs going back since last Summer. While the weekly charts still show some work to be done to improve the intermediate-term picture, Copper's move looks to extend in the short run to 3.10-3.20 before finding much resistance. Given this metal's record as a forward looking Economic gauge, it might appear that the economy isn't in as bad of shape as some might suggest. Overall one should consider owning Copper in the near-term (3-5 days) as well as looking to buy pullbacks in the metal and in Copper related stocks given this move.