February 1, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2670-2, 2656-8, 2622-3
Resistance: 2715-7, 2723-5
Wednesday 1 hour special 2019 Technical Outlook Webinar -presented to CMT Association
REPLAY LINK: ThursdayTechnical Webinar- 15 min
SPX - (3-5 Days)- Mildly Bullish, but Upside likely limited into Next week- S&P, DJIA, NDX and others have neared targets in both price and time, and it looks likely that some type of stallout happens next week. For Friday, this still looks early and the trend remains bullish, so it's right to stay long, until some evidence of trend reversal.
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: TTD, TEAM, SBUX, CRM, PG, HCA, ROKU, DATA, EVBG, CCI, VTR, WELL, TECK, ARNA, MRK, LLY, REGN
Trading Shorts: ILMN, VOD, AMGN, CE, RO SWK, AAL
Equities managed to follow-through nicely again for the Bulls yesterday and breadth was still about 3/1 positive, so not a lot of concern regarding either breadth being negative on this push just yet, nor evidence of upside exhaustion. Prices managed to close near highs of the session and Demark indicators will start to show up in the next 2-3 days on this rally. (TD Combo could be triggered as early as Friday, though not confirmed, though the Setup count will take an additional few days into next week)
Importantly, SPX, DJIA, NDX, IWM, CCMP all have now broken out of the downtrend which was holding prices since last Fall's highs. This is thought to be a bullish development. Industrials have now also broken out near-term to join recent strength seen in Technology and Discretionary, but yesterday did bring about some above-average strength in the Defensive sectors, as Staples, Utilities and Telecom all rallied more than 1.5%, more than any other. Meanwhile, Financials and Tech both finished fractionally negative. Our thoughts on Financials starting to underperform was very much in effect on Thursday, and this looks to continue near-term.
The key concerns at this stage have more to do with traditionally highly positive correlating things like USDJPY and TNX both turning down sharply in recent days, and this does give worry that one of these moves between TNX and SPX is wrong. (Historically, TNX has won this battle)
For now, Equity Put/call is starting to dip down to low levels (just above .50), but the VIX breakdown makes it look like another 3 days of weakness should happen (not dissimilar from SPX (given Demark counts). Thus while a trend reversal should be near, as always, without proper evidence of any turn, or counter-trend sell, or negative breadth, it doesn't make sense just to sell because prices have rallied. We'll require some hard and fast technical proof now that downtrend lines have been exceeded across the board on many US equity indices.
Long SPY with stops 259.96, looking to sell into 270.50-271 into next week
Long XLK with target 69, stops under 64.25
Long XLI with target 74.25, stops under 69.68
Long Crude oil with movement up to $55-56 likely
Long VNQ for REIT exposure- near-term target $83.50, but over should drive to 90
Looking to short Gold at 1330-40 in next 2-3 days of rally
Additional charts and thoughts below.
SPX has now joined the NASDAQ in exceeding the key trendline that most believed would serve as resistance for this rally and this now makes two different areas that have failed to hold on gains in recent weeks (the first being 2630 near former November lows) This looks to help prices extend a bit more near-term. While targets are just fractionally above at 2715-7 for SPX cash, we're seeing Demark exhaustion being close to complete along with SPX testing its 61.8% Fib retracement of the entire decline from September. Some key cycles hit next week also which might result in a stalling out and trend reversal. For now, the trend remains bullish, but we'll be on alert for evidence of any stalling out reversal of trend or low /negative breadth that might warn of a pullback ahead.
Industrials have now risen back up above key trendline resistance along with the entire trendline resistance area stretching back since 2017. This is near-term constructive for this group (Note GE moving above $10 yesterday, up more than 10% on the day) While the relative picture for Industrials has been mixed of late, the near-term technical situation merits owning XLI for a bit more strength.
Gold is nearing its first real area of importance, and longs might be wise to consider taking profits from a trading perspective into next week. The area from 1330-40 should have importance in causing at least a temporary top, and weakness in gold in early February. Reasons for skepticism in this trend have to do with counter-trend sells which have just appeared, coinciding with near-term overbought conditions while the Dollar looks to be right at good initial support. While an eventual breakdown in the Dollar would be good for Gold, for now this is premature and this trend is getting stretched near-term. My technical call is to take profits and await pullbacks to buy.