June 11, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2892, 2880-2, 2873-4
Resistance: 2904-5, 2911-2, 2930-1
Monday Technical Video, discussing SPX and TNX
Link to 6/6/19 Technical Webinar: 20 min, covering SPX, DXY, Crude, Gold
Real Vision Interview, 6/3/19, discussing SPX, TNX stabilizing & moving higher
My CNBC interview from Thursday 5/29 on SPX, and 3 stocks to favor
SPX - (3-5 Days)- Bullish- Rally has reached initial targets, and while some minor pullback from highs occurred yesterday, this wasn't sufficient yet to suggest a top in place. Use tight stops at 2880 for longs on a close while resistance likely comes in near 2930
EuroSTOXX 50- Bullish- A bit more rally likely with targets at 3411 between today and Thursday. Support lies at 3341
HSCEI- Bullish- Yesterday's close over 10500 could drive a short-term bounce. Yet, most of Asia remains much weaker at present than SPX, or Europe. Under 10304 would drive decline.
Trading Longs: SWAV, NVTA, TPB, KHC,SPXC, CSGP, FIS, TMO, DHR, AVLR, MNST, QURE
Trading Shorts: SIG, ANF, URBN, XLC, FOSL, BBBY, GES, MO, PM, EMR
Upside looks limited this week, but heading into Tuesday, insufficient weakness has been seen to turn bearish for most investors. Aggressive traders can use Monday's 2904 high as a stop for shorts, but over this should lead to 2930 this week, potentially into Wednesday or Thursday before any temporary high is in place. When scanning most US indices and sectors, we find that nearly all of these show a Demark "5 count" after having made five consecutive daily closes above the close from four trading days ago. In plain English, markets typically stall out and/or peak on an 8 or 9. Thus, we can allow for another couple days, using this system alone, when expecting a possible peak.
ETF's like the following likely should have max upside at the following levels this week: First price is closing price for Monday; The second price is the maximum upside target: SPX for example is at 2886.73, and has a max target at 2945 on this bounce
XLY-$116- Target 120
XLK- $77- Target $79.70
XLF- $21.35- Target 27.90
XLI- $75.82- Target $78.40
Overall, yesterday's rise , yet again, showed signs of lackluster breadth, with just a 3/2 positive margin. Technology however, showed sharp gains, thanks to Semiconductor names, as the SOXs 2.54% gains helped to lead performance yesterday. (SOX in this case at 1413.89, is on a "6 count" and 2-3 days away from a possible peak, and likely has max upside near its 50% retracement, which is found at 1445.78. Bottom line, given that so many various indices and sectors are showing this same count, on a 5, or 6, leads me to think that another few days are possible in this bounce.
Outside of Domestic markets, there was a healthy move in China's FXI along with Emerging markets in general. This area is thought to be weak, technically; However, we're definitely seeing some ability to play catchup, which i feel should prove short-lived.
Finally, Treasury yields managed to show a decent bounce Monday, closing above the highs of the past few days. Given that Demark patterns here never signaled any kind of meaningful low, and momentum remains quite strong to the downside, for now, it's right to suspect this might be a "wave 4" type Elliott bounce and a final pullback to 2.06% or slightly under can happen into the FOMC meeting before any low in yields.
Risk assets overall are still favored here, though it's wise to be much more selective this week, and i expect upside to prove relatively limited with some evidence of a minor peak in Stocks seen this week, along with Yields stalling and turning back down to new lows.
Long IHI, with targets at 240, stops under 221
Long XLF with initial targets at 28, with stops under 25.92
Long KRE with targets at 57 and stops under 51.41
Long XLU, targeting 61.25-61.50. Buy weakness at 58
Short XLC- expecting pullback to 44.50 and then a max near 43.70- stops at 47.05
Covering short EEM, and taking profits in long Copper- COPX, HG_F
Additional charts and thoughts below.
S&P getting stretched, but yet yesterday's pullback was insufficient to thinking top in place just yet. This past weekend's Weekly Technical perspective discussed some of the reasons for concern heading into this week after a swift, sharp gain for SPX, while weekly and monthly momentum have been negatively sloped. This creates a difficult environment for being long with any real confidence, particularly when trends turned down so sharply in May. For now, the decline off yesterday's intra-day highs was somewhat important in thinking exhaustion is near, yet in these cases its often important to see a move down under the prior day's lows towards driving a decline. Therefore, we'll use 2880 in this case as a stop for longs on a close, while expecting that any move over 2904 should allow for a move to 2930, but that the area between 2930 and 2945 should be very strong resistance for the month of June. Pullbacks could happen in the back half of June, but should create buying opportunities for the month of July.
XLK (Big-Cap Technology) looks to be nearing resistance- XLK, as the current SPDR ETF for Technology, shows a similar rebound as was seen in our Equal-weighted Technology chart shown in Monday morning's weekly. However, the importance in this chart is seen in the "5 COUNT" shown in green, as "9 counts" (Demark based exhaustion based on TD Sequential and TD Combo indicator) should be complete within 3 days time. Thus, upside here looks limited for Technology and while the near-term trend is bullish, one should be looking to pare down longs as the week progresses, with former highs near 79.70, less than $3 higher, likely serving as good resistance to gains.
Brokers getting stretched relative to Financial space. Favor the Banks-IAI, or the Ishares Broker Dealer & Security Exchanges ETF, when compared to the broader XLF, shows pretty substantial outperformance over the Financials, and in this case, most of the Banks in recent months. This looks to be nearing conclusion, as we're seeing ratios arrive at price and time areas where this could stall out. One should look to consider taking profits in Brokers and the Exchange stocks, while favoring the Banks among Financials. While a larger bullish trade in the Financials depends on yields likely turning up more aggressively in the US 10-Year yield, my thinking is this should be in place after the Fed meeting, and right to buy dips in the Financial space, if given the chance over the next week