April 3, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2854, 2840, 2820
Resistance: 2875-6, 2880, 2885-7
Tentatively scheduled to be on CNBC today at 2:20-2:25pm
Tuesday 4/2 Mid-day Technical Video Link
Thursday 3/28 Technical Webinar Link
CNBC Fast money interview on FDX, Transports from Tuesday 3/19/19
SPX - (3-5 Days)- Mildly Bullish, expecting 2880-5 but raising stops to 2819 for longs on a closing basis. SPX looks close to making a near-term top, as counter-trend exhaustion is very close, within 2-3 days, while negative divergence is now present on this rise while Technology is close to resistance. For now, a mildly bullish stance is correct for the balance of this week, until more meaningful reversal gets underway.
EuroSTOXX 50- Mildly bullish- No change- Expecting 3425-3460 into next few days before a stallout and reversal. Stops on longs under 3325
HSCEI- Neutral- Prices have reached highs of one-month range, and while 11900 can't be ruled out. the risk/reward is not as good near-term. Under 11420 is a stop for longs
Trading Longs: NBIX, MDCO, DVAX, COLM, UBNT, QSR, HEAR, ETSY, REGN, FB, AVGO, TSCO, HD, DHR, XOP, USO, FLT, PCAR
Trading Shorts: OSTK, CI, MHK, WATT, EXPE
Some minor evidence of stallout Tuesday and by day's end, SPX had largely finished unchanged, while NASDAQ was higher by 0.25% and DJIA was fractionally lower. Breadth came in Negative ever so slightly and around half the sectors finished down, led by Consumer Staples and Energy, despite the late surge by WTI Crude. All in all, not a convincing reversal sign for indices, but yet seeing some negative breadth towards the end of rallies typically will be important to monitor over these next couple days. Overall, to have real faith in a reversal, ideally we'll need to see an early rally attempt that fails and moves to new multi-day lows. (At present we've seen four straight days where the open, high, low and close were all higher) The minor pullback we saw from 3/21 into 3/27 failed to do much damage and held the trendline from December lows. Getting below this swing low which hits this trend would involve a close down UNDER 2785, or around 80 points lower. Thus, a minor pullback is possible that doesn't make much progress lower and then pushes higher. Yet, at this stage of the rally with the start of breadth stalling while Technology reaches resistance, we have more evidence that a pullback, even if minor, should be right around the corner.
Two groups could come to the rescue to bail out Technology and buoy the market during the month of April. Transports are one of these which had lagged badly in the last month, but which have come to life recently, with Rails breaking back out to new highs (see CSX, NSC, KSU, UNP) Even the Airlines have managed a bounce, within their respective bearish pattern. The second is Healthcare, which is looking increasingly interesting as a long. Biotech ETF (XBI) along with the Healthcare ETF (XLV) both show triangle patterns where prices are now testing the upper part of this boundary which has already been tested before (and in my thinking, should finally lead to a breakout in this group) Overall, both of these latter sectors are attractive and can be considered substitutes for those wishing to exit Technology in the next 1-2 days.
Long XRT, targeting 47.50 with stops raised to 44.65
Long XLY with targets at 118 and stops raised to 113.50
Long XOP- Targets 32.50, stops raised to 30.35
Long FAANG stocks-AMZN and NFLX are catching up and target for NYFANG index (bloomberg is 2800 with stop at 2612
Long TLT- Target 127.5. Use this weakness to add to longs with stops under 123
Additional charts and thoughts below.
S&P has now pushed higher off its trend from December for four straight sessions, with SPX cash index recording exhaustion, while Futures contracts for June show these to be two days away. Meanwhile momentum has made a pattern of lower highs than either of the two recent peaks. Bottom line, the trend remains positive and for now, no evidence of any reversal. Thus, a bit more strength looks possible with targets at 2880-5 for SPX cash. If Transports and Healthcare can both follow through on recent strength, this would be seen as a big positive at a time when Tech is thought to face major resistance and likely stall out by next week. To have real confidence in any pullback, prices will need to get down under 2785, which represents the uptrend line and last swing low. Until that time the trend is bullish, but one should look to sell into strength over the next 2-3 days.
Transportation stocks have been the number 1 performing SPX GICS Level 2 group in the past week, showing +6% performance out of 24 groups. The DJ Transportation Avg, shown above, has now officially begun to play catch-up, and technically has just exceeded the entire downtrend from September, something that most market indices accomplished around two months ago. Near-term, while February highs could represent some minor resistance, this breakout is worth highlighting and should lead to outperformance in the weeks and months ahead. Rail stocks in particular are the most attractive part of this group, and stocks like CSX, UNP, KSU, and NSC have all shown recent breakouts that make this area worth highlighting.
Healthcare now is on the verge of breaking out after nearly a full month of sideways trading. This sector lagged throughout the month of March, but now is well positioned to move higher after pushing up to test the upside border of this Triangle which has been intact for the last couple months. Patterns look similar in both XLV and also XBI and favor being long after already one successful test, thinking that the second retest won't hold, and we'll see a breakout of this pattern. Overall, it looks right to favor Healthcare for a bounce this month and to play catchup after having lagged this last month. Technically, this sector remains good structurally but just looks to have consolidated, which has helped to alleviate overbought conditions.