February 5, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2707-8, 2689-91, 2670-2, 2656-8
Resistance: 2733-5, 2742-4
Wednesday 1 hour special 2019 Technical Outlook Webinar -presented to CMT Association
REPLAY LINK: ThursdayTechnical Webinar- 15 min
SPX - (3-5 Days)- Bullish- Despite being stretched, still no compelling evidence that indices are peaking, and Demark indicators will take another 3-4 days at a minimum to complete. Overall, it's right to stay long until some evidence of reversal arises, which could be later this week.
EuroSTOXX 50- Bullish- Rallies up to 3200-50 look possible before this stalls. Under 3094 necessary to change this trend.
HSCEI- Stallout looks to be happening after test of last Sept highs. Trend won't be bearish unless 10550 is undercut. One should consider a move back over 11165 to prove short-lived.
Trading Longs: IGV, MEDP, TEAM, SBUX, CRM, PG, HCA, EVBG, CCI, VTR, WELL, TECK, ARNA, MRK, LLY, REGN
Trading Shorts: ILMN, CBOE, CI, MKC, VOD, AMGN, CE, SWK
Equities managed to turn back higher yesterday, after nearly 48 hours of sideways prices. While many are looking for excuses to sell into this move, there still hasn't been sufficient weakness to think a peak is imminent just yet. It's important that at least some evidence of trend reversal occurs (pulling back to the days lows after an early gain, or reversing to close at multiple days lows ) Breadth came in around a 2/1 positive yesterday, and momentum still has not reached overbought levels. Treasury yields managed to rise 3bps yesterday also, so this needs to be watched closely as well because yiedls had not been following stocks of late.
Technology managed to roar back to life yesterday, being led again by the Enterprise software space. This group along with Financials continue to be the top areas to watch for evidence of stocks stalling which for now is premature. Heading into Tuesday, a move down under 2696 would fit the bill, and particularly if prices get below 2672.
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 exceeded 2715, an area that was thought to have importance in recent days, and has officially gotten back above its 61.8% Fibonacci retracement area. Given that no counter-trend exhaustion is present, and no evidence of any trend reversal has occurred in recent trading days, additional gains still look possible over the next few days of this week. Momentum has not gotten overbought yet on daily charts on this rally, so until there is some evidence of pulling back and reversing course, one would still stay long, while looking to pare down on this rally once Demark's TD Sequential and TD Combo complete (which might take another 3-5 trading days)
IGV, the Ishares Software ETF. has begun to show greater signs of recent upside acceleration and further gains look likely to test last year's highs before any trend reversal occurs. This group has been one of the hotter areas in the market in recent days, and little immediate resistance looks to stop this trend given a lack of counter-trend exhaustion as IGV managed to move back above an 80% retracement of last year's decline. Overall, one should own Software, looking to buy dips on any pullback in the days to come with targets at former peaks.
Homebuilders look attractive at current levels and recent strength should continue in the weeks ahead as part of this current mean reversion. This group was one of last year's real laggards, peaking out in May and declining nearly the entire year before bottoming when broader indices did in late December. Its rally has been impressive, breaking out above the entire downtrend which guided this lower last year, and the move above $36 is thought to be constructive technically speaking. Initial targets lie near $38.50 and moving above that would allow for a greater push higher to the low to mid $40's.