April 4, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2854, 2840, 2820
Resistance: 2875-6, 2880, 2885-7
CNBC 4/3 interview on Semiconductor stocks & why best to hold off
Wednesday 4/3 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)- Expect Stallout/reversal between Thursday and next Monday, with resistance at 2905. Stops are raised to 2848 on a close
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- No change- 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: CMCSA, MAS, ROKU, DLTR, TRP, GDDY, 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
Stocks staged just minor reversals from intra-day highs yesterday, though no real damage was done by the close, with prices failing to take out prior lows and trends still very much in place. Breadth came in marginally positive around 3/2 with Tech and Discretionary doing all the heavy lifting, while we saw some definite evidence of Staples and Energy making pretty sharp pullbacks.
Overall, my view is that Technology has limited upside here, based on the S&P 500 Information Technology index back up at former highs, while momentum has lagged for the last two months. Parts of Tech like the FAANG group still look to be able to extend on a 3-5 day basis, but my thinking remains that it's right to consider taking some profits and shifting into Healthcare or into Transportation. On a very near-term basis, there was some definite strength in the Consumer Discretionary group which still looks to lead between today and early next week, while the Consumer Staples group looks to be breaking down and can be avoided.
Outside of Equities, there is some real weakness in Treasuries near-term as yields have turned up to follow stocks over the last few days. Meanwhile the Dollar has been gradually getting weaker, with the Euro trying to firm while Pound Sterling has found a small bid given the UK Parliament's decision to block a No-deal Brexit. Bottom line, the trend in US Dollar can't be called bearish just yet in the short run, and it's still difficult to expect prices to fall right away. WIth regards to Yields, it's thought that another 1-2 days of yield bounce is possible, but this should pave the way for a reversal back lower, and could coincide with equities following suit in the weeks ahead.
Overall, its right to be far more selective at this stage of the rally and there are some cyclical facotrs that could allow for a minor top in stocks by early morning Friday into next Monday. If this doesn't work, than 4/9-4/10 is the next most important area. VIX in particular rose to new multi-day high closes yesterday, which is odd given the market rally and typically makes it worthwhile to pay attention for the potential for a reversal. However, it's thought that a 3-5% pullback into end of April would be buyable, and for now, cannot be confirmed given the lack of weakness. One should stick with Discretionary into next week and buy weakness in Healthcare, while avoiding Tech at this point along with Staples.
Long XRT, Lowering targets to 45.75-46.25 with stops raised to 44.75 on a close
Long XLY with targets at 118 and stops raised to 113.50
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 risen for five straight days, which often historically has led to at least a bit more strength in the days to come. In this case, prices are entering the first of two key time zones for trend change. The first starts Thursday into next Monday, and the second will take place at the end of next week. Breadth has stalled a bit, while momentum has failed to keep up with prices push back to new highs. Overall, until there is evidence of price turning down to take out 2848 on a close, it's worth still sticking with this rally, but yet looking to rotate out of groups like Technology and into Healthcare. Specifically for the next 3-5 days, Consumer Discretionary looks to be an outperformer into next week, and should be favored for outperformance. In regards to S&P, we'll need to see some degree of weakness to pay attention with daily closes under 2848.
Technology has now risen right back to former highs, a level which should provide some resistance to this rally. Semiconductor stocks in particular have risen more than 35% in the last 3 months and now up to similar levels. Momentum, meanwhile, has failed to keep up with price action , and this combined with former resistance, could be important in allowing for a slowdown in Tech in the coming days. Overall, it looks right to sell into this move in Tech and consider diversifying into different sectors.
Consumer Staples has broken the trend from December over the last two trading days. It was thought that the flight to Defensive might prove short-lived, and with the equity rally having persisted of late, this group has now weakened enough to violate its uptrend. This is a bearish development and should lead to additional underperformance in the days and weeks ahead after this rally.