May 31, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2762-3, 2743-5, 2732-4
Resistance: 2800-1, 2840-2, 2864-8
Thursday Technical Webinar 5/30/19- SPX, TNX, Crude, Dollar
My CNBC interview from Thursday 5/29 on SPX, and 3 stocks to favor
My Bloomberg Interview on Rising US Dollar and Detrimental effects to Emerging Mkts- 5/22/19
SPX - (3-5 Days)- Bearish- Insufficient signs of bottoming- Yesterday's bounce attempt failed to get over 2800 and then fell to unchanged. The Subsequent volatility in the after-market on Trump tariff talks has resulted in further deterioration heading into the final day of May. Bottom line, it still looks like weakness is possible down to 2722-36 area before lows are in.
EuroSTOXX 50- Bearish- Minor rebound attempt failed to get back over the area of the breakdown- 3323, and should move lower to 3283, or a max of 3212 before finding support.
HSCEI- Bearish- Six days of unchanged prices doesn't argue for any sort of rallyand momentum remains quite negative. Expect further weakness to 10067-10100 initially with possibility of 9761.
Trading Longs: VXX, ACC, AVB, QURE, AEP, ED, WEC
Trading Shorts: WTI, COP, IMO, APA, DVN, NOV, CHRW, SIG, TPR, KHC, MO, PM, URBN, HTZ, EEM, FXI, ALB, COPX, BBBY, DDD, UNG, KSS, LVS, EMR, AOS
Yesterday's rally attempt in many indices..both US and abroad, failed to get back up over the area of the breakdown and looked like nothing more than a reflex rally after this week's violation of support. Breadth was flat for today, and more volume flowed into DOWN stocks than UP. By the end of day, prices had moved back down to unchanged on the session. After the market close, futures have turned back lower sharply and at the time of writing are lower by -0.70% in both S&P and NASDAQ Futures.
Treasury yields turned back lower on Thursday, as did Crude oil, two areas which had tried to make a minor rebound into the close on Wednesday. Yet, Yields finished back lower and are now back near 2.21%. Crude oil meanwhile was hit hard to the tune of 4% in trading on Thursday, and there is little to no real support for WTI until prices get to near $55-$55.35, or near the 50% retracement of the entire move up off the December lows.
BOTTOM LINE: Insufficient recovery, and the downtrend remains in place. Poor recovery effort with lackluster breadth and volume and structurally most indices still look to require another move lower before putting in any sort of bottom.
Short EEM with targets at 39, then 38.04 maximum
Short XOP with expectations of a move to 25.50 and then 23.89 to challenge
Long XLU targeting 59.85-60 - Buy Weakness at 58
Additional charts and thoughts below.
S&P- Overnight tariff threats to Mexico has resulted in S&P gapping down under 2770 heading into Friday, the final trading day of the month. No real support exists until near 2722-35, and it remains premature to try to buy dips given the ongoing poor structure and momentum. Thursday's trading provided a good "tell" in that rallies failed 1 tick under the key 2800 level before pulling back to unchanged. Now post market close on Thursday, S&P Futures have sold off under prior days lows with little to no real counter-trend exhaustion. One should hold off on getting too aggressive in trying to buy dips and additional downside still looks lately.
Crude oil's nearly 4% Drop Thursday keeps this trend bearish and prices in many Energy stocks could follow headed into the final day of the week an into early next. Targets lie near $55-$55.30 initially which represents both a 50% retracement as well as coinciding with Demark based exhaustion. Overall, Energy has quickly slipped back to being the worst performing sector over the last 1, 3 and 6 month periods, and while many stocks are getting quite oversold, it still looks early to buy into this pullback.
Put/Call ratio on Equities has become more subdued after spiking up near .80 last month. This was an interesting development to suggest additional selling might still be likely. Given the VIX breakout and Crude decline, it's likely that this can start to move a bit more higher in implieds but should be watched carefully.