April 9, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2880, 2870, 2861, 2848-9
Resistance: 2902-4, 2908-10, 2915-7
Monday Technical Video- 4/8/19
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 Expected Tuesday/Wednesday, Max upside to 2915- Under 2880 should confirm
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- Mildly bullish- No change-Movement up to 11895-12000 looks possible into Wednesday before exhaustion sets in. For now, China stronger than US near-term
Trading Longs: UNG, DBC, FCX, LYB, DWDP, CMCSA, MAS, TRP, UBNT, QSR, ETSY, REGN, FB, AVGO, TSCO, HD, DHR, XOP, USO, FLT, PCAR
Trading Shorts: SIG, TLRY, KR, GES, CME, CBOE, MO, OI, LB, TWLO, TEAM, CTXS, OSTK, CI, MHK, WATT, EXPE
Fractional gains yet again for yesterday, and yet again, indices look to successfully battled back to close the day having erased the earlier loss. Breadth however barely finished positive and five sectors were down on the day. Specifically for Tuesday/Wednesday, it looks to be problematic that XLY is now right at the level of last Octobers highs while showing evidence of counter-trend exhaustion in this trend. Additionally, Industrials also looks to be stalling out near February's highs and has similar exhaustion, which last time proved to be problematic for this group in late February. Technology has seen some real ability of the FAANG group to play catchup of late, FB, AAPL, AMZN, NFLX, GOOGL, yet XLI looks to have its own level of resistance near last Fall's highs while also showing a similar pattern of counter-trend exhaustion.
Thus, overall the problem certainly isn't with the trend, but yet with the plethora of exhaustion signals now being seen on the benchmark indices on daily charts along with many of the sectors that have led this market over the first three months of this year. Breadth has now begun to slow a bit, and momentum has not been as strong over the last week. All of these reasons are grounds to consider buying implied volatility in the near-term, and/or considering lightening up in some of the stocks which have now reached prior highs similar to the indices themselves. While the intermediate-term trend still looks quite strong from December 2018 lows and not vulnerable to a large correction, the near-term has given a few hints of cautionary signs for those that are watching and might cause this bullish seasonal month of April to be a bit tougher than many expect to continue straight higher.
Outside of Equities, commodities seem to have suddenly taken charge in the last month, despite the Dollar not having really turned lower materially just yet. Some of the precious metals have rallied, while Energy certainly has been a bright spot. Cattle and Lean Hogs have fared well along with Cotton, and rallies in Coffee (if momentum is any guide) seem to be right around the corner. What's particularly bullish however looks to be what's happened to Natural Gas in the last 24 hours as prices have rallied sharply to break the downtrend over the last month after having hit good support. This move looks to extend in the weeks ahead, and pullbacks could be utilized to give this a closer look as a long, given forecasts of potentially a cooler back half of April.
Closing out long XRT, XLY and taking profits on the open, Tuesday 4/9
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
Long FAANG stocks through NYFANG basket, but looking at selling Tuesday, or Wednesday of this week 4/9-10
Short XLK at 76.75 or higher, with targets at 72.25
Short XLY at 118 or higher with targets at 114.50
Additional charts and thoughts below.
NDX has gotten right back to prior highs, a level which likely will cause some stalling out this week as this represents strong resistance to the advance. The area from 7600 to 7750 should be thought of something to consider selling into initially as prices near this level. Upon any sort of pullback to this uptrend, that's likely the extent of the selling, at least for the month of April.
Commodities look to be turning higher, regardless of any strong downward pressure in the US Dollar. The last two weeks have seen consistent gains in the Invesco DB Commodity Index tracking fund (DBC) which has helped this reach the highest levels since last November. Trends remain bullish, and this should be an area to consider diversifying into, as this uptrend should begin to accelerate as the Dollar's drop starts to gain speed.
Natural Gas surge yesterday makes UNG attractive to consider as a technical long, as June Nat Gas likely goes from 2.70 back to 2.90 in the short run. After having held a key area of support that held four times since last September, this managed to gain ground to multi-day highs yesterday, rising back up above 2.70. UNG, the ETF for Natural gas (non-levered) looks to be a good bet to rise to $25 in the short run, and longs are favored for follow-through in the days and weeks ahead.