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Semis lead as US Equities pull to within 1% of All-time Highs

June 19, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



SPX Cash Index

Support: 2917-8, 2905-7, 2892, 2884-5

Resistance: 2930-1, 2943-5, 2968-70



Tentatively scheduled for CNBC Trading Nation today at 2:20-5 and also CNBC Fast Money near 5:20-5



Link to 6/18 Technical Video, discussing SPX gains ahead of FOMC

https://stme.in/bUHbHOYP96



Link to 6/13 Technical Webinar, discussing SPX, TNX, Crude, Gold and more

https://stme.in/rz4cpQWMpz



Real Vision Interview, 6/3/19, discussing SPX, TNX stabilizing & moving higher

https://www.realvision.com/tv/shows/trade-ideas/videos/finding-a-bottom





SPX - (3-5 Days)- Bullish to 2930-45- Yesterday's rally above 2910 was worth following for a move which likely gets up a bit higher to test April highs before any real top. SPY volume doubled the prior day's totals and breadth came in at 3.5/1 positive, all Pluses.



EuroSTOXX 50- Bullish- While slightly overbought on an intra-day basis, Tuesday's move should lead to a test of April highs near 3511. One should use any minor weakness Wednesday to buy dips down to 3363 and expect further strength into early next week



HSCEI- Bearish- Expecting weakness down to 10067-10100. Gains over 10564 necessary before being too bullish.





Trading Longs: NOW, IPHI, TNET, XBI, MRTX, IOVA, AKBA, EXEL, MCD, PLAN, WEC, CMS, SO, PNW, ROKU, TNDM, TNET, SWAV, NVTA, TPB, KHC, CSGP, FIS, TMO, DHR, AVLR



Trading Shorts: SPB, AWI, CROX, SIG, SYMC, WDC, STX, URBN, FOSL


Tuesday's rip certainly cleared up the near-term indecision caused by six sideways days, and clearly puts the Bulls back in the "Driver's Seat" in the short run. While near-term overdone on an intraday basis, breadth took a much needed turn higher yesterday and by the close we saw nearly 3/1 positive breadth while volume flowed into Up vs Down stocks at a near 4/1 ratio or nearly 80%. Technology, Financials, Energy, Industrials all posted gains of greater than 1% in trading, while Staples, Utilities and REITS all lagged in trading and were down on the day. To have any conviction about the possibility of a reversal, stocks at this point would need to erase ALL of Tuesday's gains and close back down under Last Friday's lows at 2879.62.. a Tall order, to say the least. Momentum remains positively sloped and not overbought on daily charts, while sentiment remains clearly subdued with pressure being put on the FOMC to ease, while a Trade deal thus far, has not been achieved. POTUS comments on US Meeting with China at the upcoming G-20 directly coincided with yesterday's surge, but more will be needed to help sentiment get more bullish. From a non-technical perspective, It's thought that enough upside potential is in the cards with a completed Trade deal and a FOMC that does what the market is pricing in (no cut in June, but a July cut) that it's tough getting too negative without any deterioration in price action.



Technology in particular turned up sharply yesterday, leading all sectors, with the Semi group leading the charge. This is a positive development along with Industrials and Healthcare starting to act well, and is thought to be enough to carry the market a bit further in the short run. If Financials can stabilize here with the FOMC not spooking the market and yields start to turn higher, this would be a definite positive which would add to the degree of participation. For now, Financials have been strong since March but have lagged in recent weeks and this will need to change to have more confidence.




Outside of Stocks, The US Dollar firmed a bit, while Treasury yields fell precipitously, not just in US but around the globe. German Bund yields fell to -0.32 bps while French, Austrian and Swedish sovereign 10yr notes fell below 0 for the first time ever. As has been mentioned of late, TNX is now getting very close to important support which likely can hold in the next week and turn back higher. It's worth not getting too aggressive on long Treasury holdings here and using any further TLT strength to take profits and consider "going the other way" into July as yields are getting overdone and counter-trend exhaustion is present. This could take the form of considering long TBT as a long play for the next 6-8 weeks into August, and expecting that yields hold 1.95% and start to reverse.




ACTION PLAN- 



Long XBI -Long half unit, and using any pullback to 83-84.50 to add, expecting July rally back to 94


Long IHI, with targets at 240, stops under 221


Long SMH, looking to buy weakness, with targets at 112

Long XLU, targeting 61.25-61.50. Buy weakness at 58



Additional charts and thoughts below.

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NASDAQ Composite, along with SPX and DJIA all jumped to new June highs, within striking distance of peaks made in April. Volume and breadth expanded and was a step in the right direction for the Bulls, in the short run. The NASDAQ is shown here as it tends to be the one index to concentrate on, along with TRAN and SOX, for those looking for leading sectors and indices. NASDAQ peaked a full month ahead of the broader market last Fall, and currently shows no divergences. It's thought that a move into April highs should occur before any reversal and likely gets above this area into July/August. Thus, while maybe extended intra-day and could benefit from a minor pullback post Fed, this is thought to be a buying opportunity for a rally into 6/24-5. With all the indecision into FOMC, yesterday's price action gave us a far more complete picture and "tell" than Monday's trading, so it will pay to stick with that, until proven otherwise.




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Semiconductor stocks led performance in trading Tuesday, outperforming other areas in Technology and taking a much needed step higher after nearly two months of fairly dismal performance. SOX charts show this to be the start of a likely "3rd" wave or "C" wave higher in SOX which i expect to move higher into 1483-95 without much trouble. This would allow the two waves to be equal price-wise and equate to a Fibonacci 61.8% retracement of this past Spring's decline. Overall, it's hard to project a move back to highs, but at least some additional upside here looks probable for Semis, specifically as a result of Tuesday's strength.


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Beyond Meat (BYND) reversed course, but does that mean the top is in? Maybe, but maybe not. More evidence necessary- BYND, the much heralded IPO which has gained more than 260% in just a couple months time since its May IPO, showed its first evidence of weakening in trading on Tuesday, trading up over 200 before closing down at a mild loss. When stocks that make rapid gains like this start to reverse course dramatically, it's often worth paying attention, particulalrly when they have market capitalization in excess of 10 billion. In this case, for those making comparisons to TLRY_ Tilray, it's worth pointing out that uptrends have not been broken yet, and this is the first piece of evidence that's needed before weighing in bearish, regardless of the valuation. Second, yesterday's pullback failed to even take out the prior day's lows. Thus, a dramatic reversal, but more needs to be done to validate the bears arguments, Technically speaking. Movement under $150 is thought to be the first real technical evidence of a possible larger pullback, and would cause movement down to $115-120. Until then, this upward volatility could very well continue in the short run, whether warranted or not.