April 18, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2900-2, 2892-3, 2872-7
Resistance: 2915-7, 2923-5, 2945-9
Note : No Weekly call or daily videos this week, as I am travelling out of the country. Normal service will resume next week. Thanks for your understanding.
Thursday Technical Webinar Link - 4/11/19
My CNBC Interview on Disney and why shares are attractive 4/11/19
Bloomberg Interview Monday 4/8- Natural Gas turning higher
SPX - (3-5 Days)- Bullish barring a break of 2900- Gradual waning, which is largely Healthcare related, but Tech, Financials and Industrials are all still positive and ETF's of these sectors have moved to new highs for 2019 and in the case for XLK and XLY, new all-time highs. Above 2915 is bullish for a move up to 2945-9. Under 2877 important for the bear case.
EuroSTOXX 50- Bullish- Europe has been stronger than SPX lately and move up to 3600 likely
HSCEI- Bullish- Movement back to the highs now looks to result in further strength near-term and right to be long and buy minor dips. Under 11423 is negative for further weakness
Trading Longs: WIX, HRS, PEP, KO, TSCO, TEAM, FCX, LYB, CMCSA, MAS, TRP, QSR, THD, DHR, XOP, USO, FLT, PCAR
Trading Shorts: SIG, KR, GES, CTXS, OSTK, CI, MHK, WATT, EXPE
The two big themes for yesterday's trading revolved around both the ongoing decline in Healthcare, which began to exhibit capitulatory type selling, as well as the advance in Transports, which partially offset, but enough to keep indices largely unchanged, with just small losses by the close. Rails helped Transports as well as Industrials (shown below) which have moved to new highs for the year.
Healthcare accounts for over 13.3% of the SPX, so certainly important as the second largest sector behind Technology. The breakdown in stocks like ALXN, DVA, VRTX, EW, REGN, ISRG, NKTR has been extreme, and each of these stocks was down more than 6% on Wednesday alone. Charts on XLV (shown below) looks to be in a capitulatory type decline and still early for any type of meaningful bottom. Any bounce Thursday/Friday should still be a selling opportunity for a bit more weakness into early next week.
Overall, it's important to note that the 3 big sectors which had accounted for most of the performance thus far this year, Technology, Industirals and Discretionary, have now all moved up above former highs, with Tech and Discretionary moving back to new all-time highs, while Industrials has hit new highs for 2019. These are all temporary positive developments. Upon closer look, the long-term momentum decline has certainly weighed on these sectors, and we'll dig into this a bit deeper in the weekly piece next Monday morning. For now, seeing some type of stabilization in Healthcare will be important for the market, but Tech , Industrials and Financials are perfectly able to carry prices higher near-term a bit longer.
Long XLF with targets at 28-28.50
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
Long Copper for a move up to 308-310
Additional charts and thoughts below.
Industrials have managed to power higher over both prior highs thought to be important. Rails have been primarily responsible, but definitely a very bullish move that argues for further gains in the days/weeks ahead with targets near last Fall's highs. Industrials have now moved back to new highs for the year, while both XLK and XLY have moved to new all-time highs. While momentum has certainly not followed on a long-term basis given the extent of 4Q deterioration, this is a short-term positive. Stocks like UNP, CSX, NSC, KSU have all shown excellent near-term structure and moved higher.
Healthcare, as seen by the SPDR ETF, XLV, broke down exactly opposite of what most symmetrical triangles following lengthy uptrends produce. In this case, a violation of the lower level, which has led to rapid acceleration lower in the last couple days. Given the momentum of this move, it's difficult to call for a bottom here, despite prices reaching oversold territory quickly. Bounces could still represent selling opportunities into next week before any bottom is at hand. Any decline down to 82-83 should represent an excellent risk/reward opportunity to buy dips.
Copper is showing some real strength at the time as Treasury yields have also begun to pop. While this "forward looking" economic gauge has been strengthening, most economic data continues to miss expectations. Near-term though, this move is a positive for Copper and should drive the metal higher up to 308-310.