March 5, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2764-5, 2729-31
Resistance: 2808-10, 2818-20
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REPLAY LINK: Thursday Feb 28 Technical Webinar
SPX - (3-5 Days)- Neutral- On a day to day basis, i still think its right to stay with a Neutral call, as S&P has not yet violated 2764. However, some definite signs of Transports, Financials and industrials starting to weaken which should eventually put some pressure on the index.
EuroSTOXX 50- Upside limited- Bearish unless 3400 exceeded- Don't expect move above 3400 and rally nearing important resistance . Right to consider taking profits and adopting hedges
HSCEI- Possible near-term peak after prices got above 11750 and pulled back sharply to lows. Under 11342 would be bearish. For now, a minor pullback can happen without disturbing bullish structure.
Trading Longs: XLU, NI, EIX, SRE, PNW, PPL, TOL, ITB, BP, COP, FANG, UNG
Trading Shorts: TTWO, CI, HAE, HUM, WCG, EXPE, OSTK, TRIP, CTSH
A strange start to the first full week of March, as indices dropped more than they had in a full month before recovering partially into the close. By end of day, however, no meaningful trend damage had been done on SPX, nor NASDAQ, nor DJIA, and it was tough when looking at the indices themselves, to think the trend had turned bearish.
However, on a case by case basis, one can definitely say that Transports and Healthcare Services have been weakening while Materials stocks have borne the brunt as the snapback in the Dollar has put some pressure on Precious metals names. Meanwhile on the upside, attractive price action in the Utilities sector, with this group pushing back to new highs, while Energy has gained more than 1% in the last week with Crude holding up in pretty resilient fashion.
Overall i view this to be a very split market right now, and it might be tough in the next 7-10 trading days to profit in any overweights in Industrials (specifically Transportation stocks), Financials, or Materials names. However, being long the Utes and Energy seems like the right choice, while within Healthcare (as discussed in the weekly yesterday morning) being long Pharma, and Medical Devices stocks makes a lot of sense given recent strength. The "FAANG" group within Technology have been strengthening of late, with above-average movement in GOOGL, FB, AMZN (and this still looks like an area that might play catchup after lagging recently)
Long TBT with targets 37.50 and possibly 39 before stalling. Stops 34.75- Monday's close might bring 1-2 days of weakness, but should be used to buy at 35.25-75
Long XLU- Upside target 58.80, with stops under 56.25
Short IYT- Expect further weakness out of the Transports which is still largely the Airlines which are losing the most ground. Avoid and/or short AAL, ALK, JBLU, UAL, DAL
Closing out KRE and GDX longs. Gold is moving lower near-term, while KRE has begun to stall out along with the rest of Financials
Additional charts and thoughts below.
S&P's sideways action in the last week has led to momentum starting to turn lower, and many sectors have also been stalling out in the last few days. However, more is needed as prices remain at levels near where they traded two weeks ago. A close under 2764 would be a negative technically and if this happens Tuesday/Wednesday, even intra-day on an hourly, close, it would be right to pair down risk into the close. At current levels momentum turning negative is insufficient to turn bearish if prices is holding firm, and more is needed.
Transports have shown more signs of weakening, and while the trend in S&P is more neutral near-term, the trend for IYT and TRAN has turned negative in the short run, and additional weakness is expected. Airlines have shown some of the largest underperformance in the past week, with AAL, UAL, ALK, DAL, JBLU all losing more than 4%. Meanwhile FDX and UPS, the former which had already suffered in the last three months, (FDX losing 15.95%, the worst of the Transports) has stabilized and actually outperformed. Overall, additional weakness looks likely in the Airlines this week, and it looks premature to buy dips in IYT, or XAL index.
Utilities is one of the stronger sectors near-term, with the XLU breaking back out to new high territory, and the XLU itself has formed a weekly Cup and Handle pattern which likely leads to a quick move up to $58.75 before this finds any real exhaustion. Utilities look to be one of the more appealing groups in the next 1-2 weeks given many sectors starting to stall out, so this should be favored for outperformance and overweighted. Stocks on the "long" list like NI, SRE, PNW, PPL as of last week are all technically sound, and look to show further strength into mid-March.