March 19, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2830-1, 2824, 2808-9, 2800-2
Resistance: 2838-40, 2845, 2852-3
Replay Link- Monday Technical Video- covering SPX, XLF, IYT, XOP
Replay Link-Thursday 3/14/19 Technical Webinar
SPX - (3-5 Days)- Bullish- Target 2850-60 for SPX Transports, Financials and Energy all turning higher are near-term bullish- No evidence of trend exhaustion yet. Long with stops at 2800
EuroSTOXX 50- Bullish- No evidence of exhaustion yet and prices are through trendline resistance going back since Jan 2018 peaks. Expect movement to 3450-75 to challenge last Fall highs
HSCEI- Mildly bullish- Movement up to 11862-94 likely which is a 50% retracement of entire pullback from last year's peak
Trading Longs: BAC, GS, MS, WFC, XOP, USO, FLT, ISRG, DXCM, DHR, PCAR, GDDY, FTS, PNW
Trading Shorts: BBBY, OSTK, WATT, MHK, VMC, BWA, ROST, CE, K, HBI, EXPE, TRIP
Early weakness failed to hold and by day's end, prices were higher across the board by +0.30-0.50% with particular strength in Transportation, Financials and Energy. While Technology has grown stretched, despite being bullish, which was discussed in yesterday's Weekly Technical Perspective, Technology still closed up with a higher high, higher low and higher close which keeps the trend in this group bullish.
Crude oil managed to push up above $59 briefly but still managed a close at new multi-day highs, and some evidence of upside call buying was seen in The XOP -Exploration and Production ETF yesterday which is seen as a bullish sign for additional follow-through. Additionally, the DJ Transports Average managed to make the highest daily close since early March, and should allow for additional strength in this group. While the media continues to mention Boeing (BA) in a negative light, we've seen this stock close roughly in line with where it was five days ago and very little net change, which suggests stabilization. Furthermore, Financials upward trek also was something positive in this rally and strength in the Regional banks was prevalent in trading yesterday and looks likely to continue.
Overall, at this stage of the rally, it's important to keep a close eye on breadth, as it's thought that towards the end of a move, we'll see some evidence of this rally tiring by means of flat to negative breadth, with poor volume into advancing issues and overall Advance/Decline potentially turning lower. Thus far, this has not happened, and yesterday's breadth registered 2.5/1 positive. While exhaustion signals are 3-5 days away for the major indices, we'll be on guard at this point for any move that starts higher and then closes down at a loss for the day. For now, it's still right to be bullish, but it's not wrong to consider using strength to pare losses for those who are more active traders, as its thought that some type of resistance/exhaustion is likely by end of week
Long XOP- Crude's advance should lead XOP higher to near 32.50 and its thought that this ETF challenges and breaks out of the consolidation since late January. Stops under 29.75
Long FAANG stocks- though with thinking that AMZN and NFLX make more near-term progress than FB and GOOGL.
Long KRE- Expect a push higher to test 57.64 into early April and above would be bullish for an advance into 60- Stops under 54.65
Long IYT- Target 192.25 initially- Stop 184.50
Long TLT- Target 124. Stop 120.92
Additional charts and thoughts below.
S&P Financials index managed to exceed February peaks yesterday, a move which should help this group extend in the short run, with areas near 460-5 being a legitimate target to sell longs into end of week. It's thought that Financials are just beginning to play catchup, and many names such as BAC, MS, GS, WFC all made legitimate breakouts in trading Monday, which adds to this sectors near-term attractiveness. While this is seen as a bounce only, and not the start of a long-term move, much will depend on what happens when prices near this intermediate-term downtrend shown above.
Transports look to be beginning a period of positive gains in the days ahead after prices managed to exceed the downtrend from mid-February as of Monday's close. While prices moved sideways in recent days, it was the breakout on a close yesterday that seemed important and bullish in being able to lead follow-through. One would use stops on longs near the lows of the last few trading days, but the bias looks to be higher on this lagging group and should provide a chance to play catchup this week.
XOP, the Exploration and Production ETF, looks likely to push higher given WTI Crude's advance, and with Crude likely to get to $62, XOP should test the highs of this consolidation and exceed highs in the days/weeks ahead. Targets for longs lie near 32.50, above the former peaks seen in this chart above. Long positions are recommended in Energy and in WTI, Brent Crude through ETF's, expecting further gains into April.