May 10, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2860-2, 2836-40, 2775-80
Resistance: 2898-2900, 2910-2, 2936, 2944-5
Link to Thursday 5/9 Technical Webinar-20 min overview on Selloff
My CNBC interview from yesterday, discussing Technology
SPX - (3-5 Days)- Bearish - Initial support at 2840 held yesterday within 2 ticks, and prices rallied nearly 25 handles into the close. Yet Downtrend is intact and momentum remains tilted lower. Failure to reach an agreement would send S&P down to 2775-95 in my view, and this is the key area to cover shorts. Above 2899 is bullish, and traders can use tight stops with 2880 as being a stop for shorts intra-day, and above 2899 on a close.
EuroSTOXX 50- Bearish - Acceleration has taken prices under the first Fibonacci and should hit 3283 within 4-6 trading days before a low of any magnitude. Overnight bounces on a US/China deal would need to clear 3425 to have likelihood of further gains
HSCEI- Mildly bearish-Trend has accelerated under support , but should stabilize at 50% retracement area. 10762 should provide a near-term floor and right to cover shorts here, thinking bounces would need to clear 11177 to have any real confidence.
Trading Longs: H, PRFT, ZS, TSCO, 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
BOTTOM LINE: The next 3-5 days is largely a coinflip, trends are bearish but are nearing areas where prices should bottom and begin to turn back up. Downside likely is limited to 2775 for S&P Futures while over 2899 jumpstarts the rally.
Overall, trends heading into next week largely will depend on the outcome of the US/China meeting and whether tariffs can be avoided. Given that this news did accompany many of the swings in recent days, taking a bet on the outcome would amount to largely a coin flip, though recent Trump dialogue and President Xi's letter seem to indicate the desire for a positive outcome. Note that breadth and momentum, along with Technology peaking out, however, along with Treasury yields, peaked out a full week ahead of much of the Trade tension drama. This truly set the stage, and the breakdown in Tech proved to be the catalyst.
Heading into end of week, technical trends from the 4/30 high remain bearish as of Thursday's close, though with an impressive rally to end the session which carried prices right up to important near-term resistance near the multi-day trendline. Key short-term resistance lies at 2880 while over 2899 on a close would be a signal to cover shorts and assume longs. The US has fared much better than the rest of the developed world as well as many Emerging markets which have been hit hard in recent weeks. EEM as a gauge for Emerging markets has dropped sharply, and while near-term oversold, remains difficult to bet on. Overall, for the bulls, it's a must to stabilize quickly with prices at multi-week lows and push back higher, as momentum has begun to drop off sharply. The next 24-48 hours should shed some light as to whether trends can snapback, or one final selloff is in order.
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
XLU was stopped out and XLP and XLF are close. These will be kept on a tight leash, but thought to be good risk/rewards now for those not involved, with tight stops
Additional charts and thoughts below.
S&P- Prices up near key downtrend, and a "MUST" to get over 2899 to have faith in this rally continuing. Early am lows occurred near 2838-40.This was thought to be a pivotal turning point for the day, and 2840 marked a key area of support that was based on both the 50% retracement from March-April rally as well as Gann 180 degree projections from the 4/30 high close of 2948.50. While this held on Thursday, any failure in negotiations likely would take prices back down to recent lows, and the area of 5/15-7 stands out as being important for trend change, and on declines, should turn out to be a low. Overall, it's thought that this decline should be close to nearing a low, not something which could carry on through May. Yet, it's a must for Technology to stabilize quickly given its deterioration, something shown in charts below.
S&P 500 Information Technology index- Bearish weekly drop to multi-week lows stands to confirm Demark sells barring a 1% rally Friday.
The drop to multi-week lows is a concern for Technology after the trend break for the group on daily charts, and this weekly chart also helps to put this deterioration into perspective. Prices rose right to prior highs and briefly above before reversing violently to new multi-week lows. Demark weekly TD Combo 13 sells could be confirmed on Friday's close, if Tech doesn't rally 1% higher in Friday's trading. This seems to be a bearish development, yet other sectors could come to Tech's rescue, as we've seen with Financials and Healthcare lately. For now, this past week looks to be a definite warning sign for Technology peaking, unless we can see an imminent rally back to highs.
Equity put/call ratio spiked intra-day right near late morning lows to the highest levels seen since December. This was important late morning on Thursday, as it happened right when S&P had neared the critical 2840 low. This sudden uptick in fear waned a bit towards the close with a 0.70 reading, yet eyeing the intra-day put/call trading can often be important, coinciding with hourly Demark signals, but those wishing to catch trading lows intra-day. Bottom line, while trends are bearish, prices look to be near support from a price and time perspective within the next 4-6 trading days, so it's right to use further weakness to consider covering shorts, particularlly when Equity put/call data confirms further.