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Insufficient recovery, and Semis still weak within Technology

May 9, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



SPX Cash Index

Support: 2860-2, 2836-40, 2775-80

Resistance: 2898-2900, 2910-2, 2936, 2944-5



Thurs Technical Webinar, TODAY 1pm EST- Dial in info and link below:

https://join.startmeeting.com/info69336

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

My CNBC interview from yesterday, discussing Technology

https://pub-origin.cnbc.com/video/2019/05/08/tech-sector-may-be-hitting-a-peak-technician-says.html



Wednesday Technical Video, 5/8/19, discussing Selloff yesterday

https://youtu.be/9yBPZqj2Dsk



Thursday Technical Webinar link- 20-min overview of risk assets

https://youtu.be/aMjQydjqblo





SPX - (3-5 Days)- Bearish on break of 2901 Insufficient progress yesterday, and prices will need to get back up above 2909 to argue for gains. First real support lies at 2840 and below near 2775-2800 which should prove to be a buying opportunity.



EuroSTOXX 50- Bearish - No change- prices are hugging the lower Bollinger on Daily charts, any bounce likely should not get over 3475 before turning down to challenge March lows near 3281-3 which also hits the 38.2% FIbonacci retracement.



HSCEI- Mildly Bullish- Recent selloff creates a good risk/reward to buy weakness ahead of US/China talks. Selloff has reached good support to put in a trading low within 2-3 days. HSCEI managed to hold March/April lows and its right to use recent weakness to consider covering shorts. >11429 creates a more bullish short-term view.





Trading Longs: H, DISH, CME, FIS, CHD, SBAC, TMUS, SANM, MHK, BAC, C, V, IYT, KEX, ZTS, MYL, CAR, WIX, TSCO, MAS, TRP, FLT



Trading Shorts: BHGE, DVN, EOG, XEC, NOV, SLB, FOSL, WATT, AOS, MAT, SIG, CTXS, OSTK



Equity markets traded in a much narrower range yesterday, but insufficient upward progress to argue for any sort of meaningful low at hand ahead of this week's China negotiations. Trends remain bearish since last week, and there continues to be an exodus out of Technology, with yesterday's Semiconductor weakness a prime example. Overall, no meaningful progress in Equities to argue for a difference of opinion. Trends will be negative for US Stocks, with stops on S&P shorts near 2909 and movement under 2880 leading down to 2840, and a maximum of 2775-2800 into next week.



Utilities sold off sharply yesterday, in a rare showing of exodus out of Defensive sectors even with huge indecision about the course of the China trade deal. Rates have remained low, and no real evidence of Treasury yields turning higher. Thus, this group (as discussed below) has pulled back to near make-or-break territory and will need to stabilize.





ACTION PLAN- 



Long XLU with target at 61.50 and stops at 57.50 on a close



Long XLP with target at 58.90 and stops at 56.50



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



Long IWM with targets at 162.50





Additional charts and thoughts below.

below.gif

S&P- Bearish- No real change based on yesterday's price action. Trends from the last couple months remain broken technically and not sufficiently oversold to argue for any sort of real low. Yet, as we've learned in this news sensitive tape, any hint of progress on a meaningful deal likely would bring about a decent rally, and thus one should be prepared with 2909 as an area for stops. Hourly charts above show the stair-stepping price action of this decline as its unfolded in recent days. While the structure looks choppy and overlapping , there hasn't been sufficient progress to argue for buying dips particularly given a lack of news on this Trade deal. On the downside, 2840 looks like the first meaningful area on this pullback. Below that would likely bring about a test of 2775-2800, an area that coincides with the 50% retracement of the move from mid-February.

february.gif

Semiconductors weakened further Wednesday, dropping under the key 113.50 area (SMH) and breaking uptrend line support which happened to the Technology group as a whole in recent days. This leading sector violating trendline support is seen as a negative technically, and demonstrates that this group could witness further outflows and lag after turning in superb performance over the first four months of the year. With Technology higher by nearly 24% on the year, the last two weeks have shown a notable exodus out of this group, with losses greater than 2%. Overall, it's necessary to see some evidence of stabilization before trusting this group to bounce, but for now, a break of a multi-month trend normally argues for additional weakness.

3.gif

Utilities weakened down to key make-or-break support in recent days, an area marked by a support trendline undercutting the last few weeks lows that also marked resistance for former highs. Weekly closes back under 57 in XLU would argue for more meaningful weakness out of this group at a time when rates are still dropping. This might be viewed somewhat positively from a risk-on type standpoint, and signs of deterioration would be something to keep an eye out for given the recent weakness.