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Discretionary, Technology still look to extend; No proof of any weakness just yet

February 6, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



SPX Cash Index

Support: 2728-9, 2707-8, 2700-2, 2689-91

Resistance: 2742-4, 2748-50



Wednesday Jan 30- 1 hour special 2019 Technical Outlook Webinar -presented to CMT Association

https://cmtassociation.org/video/2019-technical-outlook/




REPLAY LINK: Thursday Jan 31-Technical Webinar- 15 min

https://youtu.be/GaetauQeqKY




SPX - (3-5 Days)- Bullish- Tuesday's early pullback proved short-lived, and still no compelling evidence that indices are peaking, and Demark indicators will take another 3-4 days 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 3250 look possible before this stalls. Under 3094 necessary to change this trend.



HSCEI- Stallout likely after test of last Sept highs. Trend won't be bearish unless 10770 is undercut.




Trading Longs: PLNT, TWTR, BIIB, WYNN, MGM, LVS, ITB, FAST, ZS, IGV, MEDP, TEAM, SBUX, CRM, PG, HCA, EVBG, CCI, VTR, WELL, TECK, ARNA, MRK, LLY, REGN



Trading Shorts: MHK, HRB, GPS, ILMN, CBOE, CI, MKC, VOD, AMGN, CE, SWK


Simply put, we've seen five straight days now with higher highs, higher lows and higher closes. Trends are bullish near-term, and likely to trend still a bit higher into Friday/Monday before stalling out. In order to have any sort of bearish inkling, we'll need to see prices close down under the prior days lows at a minimum, and preferably into early next week, which would have more importance cyclically. At present, Demark exhaustion is not complete and Technology , Discretionary and Industrials are all making very sharp moves higher. Specifically given the rally back OVER 2630 and then back OVER 2715, with a lack of exhaustion, price wobble and/or break of the uptrend from Dec. 24th, it's simply tough to be bearish just yet.



Furthermore, reports of Treasury Secretary Mnuchin and Lighthizer heading to Beijing next week to continue trade talk negotiations might serve as something that holds markets higher. Regardless if this proves to be successful, breadth and price action have failed to turn down yet to confirm any pullback, and Technology's charts still look to have upside this week, and the NASDAQ specifically looks to outperform SPY





ACTION PLAN- 



Long QQQ as opposed to SPY, as this looks stronger near-term- Targets 175 but would look for evidence of near-term overbought conditions once 173 is hit. Stops under 167.3


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.

below.gif

Technology still bullish near-term and while getting stretched, still little reason to fade ahead of the weekend without any proof of reversal. Overall, Tech remains the key sector to focus in on for those who are trying to figure out SPX direction. This sector remains a healthy 20% of SPX and yesterday's close pushed up above the highs of its daily 2% Bollinger Band. The S&P 500 Information Technology index looks to push up just above 1210 before any resistance, and Demark signals are 2-3 days away from any confluence that would lead one to sell into this move. Bottom line, without any reversal, it's right to stay the course for now.

now.gif

INASDAQ has pushed up vs SPX in the last couple days, breaking out to new multi-week highs in relative terms and NASDAQ should continue to outperform SPX into end of week. For those seeking reversals, it's usually important to see the NASDAQ stall out and turn lower. For now this is clearly premature and still looks bullish.

bullish.gif

Equal-weighted Consumer Discretionary vs Equal-weighted Consumer Staples remains trending higher and yesterday's outperformance in Discretionary looks to be turning this ratio higher at a time when this was at a key crossroads. Daily charts show the breakout of Discretionary to Staples and this should make one favor Discretionary for now. Until this uptrend is broken, XLY and/or RCD which is shown here, are longs vs shorting XLP and/or RHS, the Equal-weighted version.