April 10, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2880, 2870, 2861, 2848-9
Resistance: 2902-4, 2908-10, 2915-7
Tuesday Technical Video- 4/9/19
Bloomberg Interview Monday 4/8- Natural Gas turning higher
Webinar Link from last Thursday's Technical Call- 4/4/19
SPX - (3-5 Days)- Bearish- Reversal happened on cue- 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: 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
Simply stated, Tuesday's price action was exactly what needed to happen to have some confidence of markets peaking out in the short run. We saw many indices close down at the lowest level in four days after having recorded upside exhaustion, Breadth confirmed with 3/1 bearish breadth and even heavier volume into Down v Up stocks, the Russell 2000 broke its uptrend, and 3 key sectors stalled out near prior highs: Technology, Industrials and Consumer Discretionary before turning down to make new multi-day lows.
Given that these last three groups are this current year's Leading sectors in terms of performance, we look to finally be at a spot where at least near-term weakness can occur and a short-term pullback could be underway. It's right to be defensive over the next 3-5 days, adopting hedging techniques and/or holding off on buying dips right away.
Outside of Equities the larger move of interest happened in Gold. We saw Gold turn back higher to multi-day highs after what looks to have been a successful retest of March lows. Given the Dollar starting to top out, it looks likely that Gold turns higher, as US 10-Year Treasury yields remain under pressure.
Overall, between now and end of week, it looks right to be Short Stocks, long bonds, long Gold, long Natural Gas. Charts below will help to add some perspective.
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
Sold FANG basket Tuesday at the close
Additional charts and thoughts below.
SPX rolled over yesterday to a multi-day low close. While trendlines have not yet been broken, and some might question turning bearish ahead of this development, the combination of Sectors stalling out near key levels while counter-trend sells are present on the heels of the recent stallout in breadth and momentum makes sense to adopt a defensive posture for at least a near-temr pullback. It's thought that weakness likely does not undercut 2785, so pullbacks over the next week should represent buying opportunities.
Russell 2000 and Small-caps should continue to be avoided near-term, as the break of the near-term uptrend should make IWM weaker than the market in the days to come. While SPX did not yet break its uptrend, IWM did in fact violate this trend. Thus, near-term, one can make the case for pullbacks down to $151 from its current $155.20, which could happen into next week. Thus for the Russell, yesterday's break definitely was more bearish than bullish and signals a good likelihood of further weakness.
Gold looks to have started a move back higher as its recent pullback attempt held above March lows and now the last few days have moved up meaningfully off the lows to multi-day highs. This is constructive technically and the breakout back above 1315 would be a further step in the right direction with movement back above 1325 leading to a more meaningful test of the all-important 1360-75 area. For now, given that the Equity market looks to be stalling out after nearly the best rally in over 16 months, spanning eight consecutive days higher, one might consider diversifying into Gold and/or commodities in general, and should put Gold on the "Front Burner" so to speak as something to watch carefully in the days ahead in the event we see even further follow-through.