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Dollar & Yields turning down beneficial for Commodities

April 11, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



SPX Cash Index

Support: 2877-80, 2870, 2861, 2848-9

Resistance: 2902-4, 2908-10, 2915-7



Thursday Webinar today will take place at 11 am EST- Unfortunately i will not be able to do this at 1pm today, so we're scheduling this earlier. Apologies if that doesn't work, but i will have a link that i will post afterwards to the Blog at http://newtonadvisor.com/blog and to YouTube on my channel. See me for details if you cannot locate.





Wednesday Technical Video- 4/10/19

https://stme.in/W8Cskiwxwf



Bloomberg Interview Monday 4/8- Natural Gas turning higher

https://www.msn.com/en-gb/finance/video/buy-calls-on-natural-gas-mark-newton-says/vi-BBVJIZX



Webinar Link from last Thursday's Technical Call- 4/4/19

https://youtu.be/kvOxFMEciAw





SPX - (3-5 Days)- Bearish- Reversal failed to lead to followthrough yet, but prices now back up to former highs near 2890 and should make it hard to push higher. Resistance at 2900-5 while Stocks likely begin 3-5 day pullback. Maximum weakness down to 2785-2800 in all likelihood.



EuroSTOXX 50- Bearish- Similar to SPX, SX5E has reached areas where it makes sense to lighten up and/or fade this rally. Longs have stops under 3400 and likely max upside to 3500 this week



HSCEI- Rally likely nearing its end; Expect peak Wed/Thurs to follow US/Europe lower near-term Resistance-11895-12000



Trading Longs: IAU, GLD, GDX, UNG, DBC, FCX, LYB, DWDP, CMCSA, MAS, TRP, QSR, TSCO, HD, DHR, XOP, USO, FLT, PCAR



Trading Shorts: SIG, KR, GES, CME, CBOE, MO, OI, LB, TWLO, TEAM, CTXS, OSTK, CI, MHK, WATT, EXPE



Early losses failed to hold, and prices wound up back near prior highs, with little to no damage having been done. Is this the end of the correction? We'll see.. as of now, we still have 3 very important sectors right up at resistance, while breadth and momentum have dropped off sharply. While Technology managed to lead in trading, and was the only sector along with REITS up more than 0.50%. As discussed, S&P prices are now back up to prior highs though with far less momentum and the area at 2895-2905 (if what im thinking is correct) should still be important as resistance and hold prices. ON the other hand, it's always good to know where one's wrong, and if XLY, XLI and XLK all manage to get through prior highs with little to no problems, than the rally might be able to persist a bit longer. After all, the uptrend for SPX, DJIA and NASDAQ had NOT been broken yet, but only with IWM along with some concerning problems with breadth and momentum in the very short term. So it seemed like a good spot to take a stab given some of the warning signs previously discussed, and this largely has not changed with Wednesday's trading. After nearly 3 months of being bullish, it's all about picking spots, and this continues to look appealing to me technically as a place to lighten up for at least a minor move.



Outside of equities, the real action occurred in the US Dollar and Treasury yields which both fell sharply, helping to boost commodities. Given that both fell to new multi-day lows, the decline looks to continue, and should result in CCI index breaking out to new monthly highs and Precious metals to show some real outperformance.





ACTION PLAN- 



Long GLD for a rally up to 127- Stops under 120.96



Long UNG for a rise in Natural Gas into end of April/early May with targets at 2.90-2



Long XLB with targets at 61 and stops on daily closes under 56.80



Short IWM for a move down to 151 from 155.2- Stops above 157.4



Short XLK with targets at 72.25



Short XLY with targets at 114.50







Additional charts and thoughts below.

below.png

SPX managed to push back to the highs of the last couple days, though momentum remains well off highs and as seen in RSI on hourly charts, has steadily moved lower. While a move to 2900-5 can't be ruled out, this still looks like an appealing area to take off risk, not bet on further upside. The key area to breach to have more confidence lies near 2877-8. Under those lows gives some more confidence of a peak in place that should allow for at least 3-5 days of downside.

CCI, the Equal-weighted Thomson Reuters Commodity index, has pushed back up to recent highs, and looks likely to result in this pushing higher in the days and weeks ahead. Given that both the US Dollar and Yields are declining, this should prove beneficial for commodities.

commodities.png

Chinese stocks could weaken near-term, and it's right for those short-term focused to consider taking profits and holding off from initiating new longs here right away after this recent rally. Overall the China Large-Cap ETF, FXI, looks bearish near-term given its recent reversal and further near-term weakness looks likely before this can start moving higher again. In recent days, FXI rolled over in recent days to get back below the area of the prior breakout. This close at multi-day lows likely results in FXI puling back under 45 in the days ahead , which could offer a better risk/reward opportunity on the long side. While the intermediate-term rally is very much intact, the near-term has stalled and might allow for some near-term weakness before this can turn back higher.