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US Treasury yields plummet to follow Europe, while Dollar breakout hurts Emerging markets

April 25, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



SPX Cash Index 

Support: 2926, 2916-8, 2900-2, 2892-3

Resistance: 2945-9, 2953-5, 2970-5, 3000



Thursday Technical Webinar happens today at 1pm EST-Click below at the start & Dial In

https://join.startmeeting.com/info69336

Dial-In Number (United States): (701) 801-1211, Access Code: 840-955-999





Wednesday Technical Video 4/24/19 highlighting SPX, TNX, Transports

https://youtu.be/sTkgO1Maruc



Thursday Technical Webinar Link - 4/11/19

https://youtu.be/Cn1P4hiKm-M



My CNBC Interview on Disney and why shares are attractive 4/11/19

https://www.cnbc.com/2019/04/11/as-disney-prepares-to-unveil-disney-chart-suggests-break-of-a-four-year-rut.html





SPX - (3-5 Days)- Bullish barring a close under 2877. Upside target 2945-50



EuroSTOXX 50- Bullish- Upside targets at 3600



HSCEI- Neutral- Some signs of stalling, but trend won't turn bearish until 11553 is violated



Trading Longs: IYT, LEN, LSTR, R, KEX, GDX, NEM, ZTS, VRTX, A, MYL, CAR, PCTY, HES, WHD, XOP, USO, WIX, TSCO, MAS, TRP, FLT, PCAR



Trading Shorts: PG, MAT, SIG, KR, GES, CTXS, OSTK, CI, MHK, WATT, EXPE



Key developments for yesterday centered on three things: The Treasury breakout around all parts of the curve, the big outperformance in Transportation stocks, and the lagging in most Emerging markets as the Dollar breakout from early in the week extended. S&P showed just fractional losses, but failed to give back even 1/2 of the prior day's advance, and most stocks rose in trading than declined. Thus, tough to make anything of yesterday as being all that meaningful with regards to Equities. 



However, just three sectors rose in trading (Staples, Utilities, and REITS) and there was more volume into the Declining issues than advancing. Heading into the balance of the week, one can't put too much stock in markets turning down into end of month until/unless S&P manages to pullback and erase the early week advance and undercuts 2896 at a minimum (Last Friday's lows), though getting under 2873 in SPX cash would be a much bigger deal. On the upside, it's thought that movement up to 2945-50 should cause prices to stall and potentially reverse starting near key cycle dates of May 1-2. For now, it looks right to follow the move in Transports, but also keep a close eye on the Dollar (which has broken out higher) and Treasury yields, which took a big leg down yesterday. These seemed to be the most important developments to focus on. Charts below will help to put some of this movement into perspective. .





ACTION PLAN- 



Long XOP with near-term targets at 34.50, stops under 31.75



Long IYT with targets at 209; Stops under 195



Long XLF with targets at 28-28.50- Stops on daily closes under 26.90



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



Long IWM with targets at 162.50



Long Copper for a move up to 308-310



Additional charts and thoughts below.

below.gif

Transport stocks remain attractive to own here at this stage of the rally. Yesterday saw this group demonstrate further signs of outperformance, and charts of the DJ Transportation Average have now begun a quicker ascent after the last month of churning near former highs. Airline stocks continue to largely be laggards on this move, but the Rails, Trucking, Air Freight should be favored. Stocks like R, LSTR, CAR, KEX all showed solid outperformance in yesterday's trading and could be considered as technical overweights for further relative strength during this move.

move.gif

Emerging Markets ETF -EEM- Look to buy this first dip- EEM has a decidedly downward bias over the last few trading days, and much of this looks to coincide with the recent breakout in the US Dollar which has resulted in underperformance for most Emerging markets this week. Yet it's right to think this area near 43.50 might hold as support given the ongoing uptrend. This looks to be the first real area of support for EEM on this pullback within the uptrend. Thus, an attractive risk/reward for dip buyers while any move under 43.25 would warn of a likely pullback down to $42 before any real bounce.ç

bounce.gif

Treasury Yield pullback looks to accelerate. The decline in Treasury yields looked to be the most important technical development for yesterday, with US 10-year Yields slicing back down under important trendline support that had held for the last couple months. Specifically, the move under 2.547 should result in a test of 2.45 but one can't rule out 2.40 before yields start to stabilize. It's thought that the inability of yields to trade above 2.60% for more than 1 day didn't represent as bullish of a move in rates as what was thought initially, and as daily charts show, yields stalled out near prior levels of yields lows that were thought to be important as resistance. Overall, this could be an important development that eventually leads stocks lower, as what has happened in the past, and one should keep a close eye on Rates, which for now, look to be heading back lower.