June 21, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2917-8, 2905-7, 2892, 2884-5
Resistance: 2953-5, 2968-70
Technical Analysis Video Webinar,
My CNBC interview (6/19/19) on Healthcare playing catchup after recent underperformance
My CNBC Fast Money interview (6/19/19) on Technology and Chip stocks
SPX - (3-5 Days)- Expect near-term stallout Friday-Monday before gains can continue. Look to buy weakness next week
EuroSTOXX 50- Bullish- Rally is just below targets, but likely has a bit more Friday before prices stall out
HSCEI- Bullish- Expecting this bounce continues to 11071 before stalling and offering a pullback as a chance to buy dips
Trading Longs: NOW, IPHI, TNET, IHI, XBI, MRTX, IOVA, AKBA, EXEL, MCD, PLAN, ROKU, TNDM, TNET, SWAV, NVTA, TPB, KHC, CSGP, FIS, TMO, DHR, AVLR
Trading Shorts: SPB, AWI, CROX, SIG, SYMC, WDC, STX, URBN, FOSL
Equities finally pressed up to make the long awaited move back to new high territory yesterday. SPX led this surge to new highs, while both DJIA and NASDAQ failed in this regard. Breadth was strong for the second straight day, with ample participation out of Technology, which is thought to be key. It's interesting though not surprising (from a sentiment perspective) that some of this year's biggest gains have occurred while markets have been largely preoccupied with slowing economic growth or the prospects of the Trade war being prolonged. (This has resulted in many institutional investors sticking to the sidelines who have missed out on this move) From a non-technical perspective, this next week will be hugely important, as POTUS has seemed eager to strike a deal with the Chinese, as a way of jumpstarting his reelection campaign. Just the brief mention of this caused Technology to jump and should continue to be important this coming week. Overall, trends are bullish, but intra-day momentum has gotten quite stretched and one can make the argument of a 3-5 day stallout/reversal before pushing back to new high territory.
Outside of equities, we saw the Dollar and Treasury yields plunge, while Gold hit the highest levels on a close in over 5 years. The move in Yields, as discussed yesterday, should prove short-lived, allowing for an above-average snapback over the next 2-3 months. The Dollar, however, looks to be weakening more and more, Extreme weakness and//or Economic concerns that spur on FOMC turning more dovish wouldn't be thought as something ordinarily that would be extremely bullish. However, in this case, the market is in a sweetspot to rally, as FOMC has not done much to disappoint what has already been factored in. The real concern for the months ahead, remains the fact that intermediate-term momentum (monthly) is negative and diverging- (Higher prices not leading momentum higher) Meanwhile, Small and Mid-caps fell last month to the lowest relative levels in over 3 years. Thus, it very much seems like a Large-cap Growth rally. Yet, until signs of weakness appear, markets likely still carry higher (equities) in July, and likely just stall out near-term at April highs before pressing higher. The main timeframe for concern remains September-November of this year. Further rallies which accompany sentiment turning much more bullish as the SPX gets above 3035 would be something to drive concern.
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
Additional charts and thoughts below.
SPX managed to move back to new all-time highs Thursday, and this index took the lead in outperforming both the NASDAQ and DJIA, both of which remain slightly shy of these levels. Overall, the area at 2965-70 is important in the short run. Breaking out above that would help S&P push higher to technical targets at 3040-75 into July/August. While seemingly far-fetched for this to happen right away, it's important to note that Sentiment remains largely subdued, and Technology has begun to reassert its strength, and now is back in the #1 position for the year. Bottom line, the next 3-5 days could present a challenge into end of quarter given the degree of near-term overbought conditions on hourly charts . Yet, the broader daily and weekly momentum are now positive and this remains quite resilient, trading up to and above former highs. Thus, there exist few reasons to be too concerned about this move overall, and structurally additional gains are likely to follow any minor 2-3 day pullback, lifting SPX back up to this 3040-75 area.
Crude oil has just made its largest move of the year, coinciding directly with reports of Iran having struck a US Drone. This news directly coincided with Crude having broken out above its near-term downtrend, arguing for near-term strength. In the next 3-5 days, a bit more upside is possible, with resistance coming in near 58.75-60. However, for signs that this decline has run its course, a move back up over 60 is needed. Until then, this remains a bounce within an ongoing downtrend, and is likely to encounter strong resistance just under 59.
Bloomberg Dollar index has now made two consecutive days of lossesthat have taken prices down to new multi-month lows. This has helped spur on a sharp rally in Emerging markets, including China, along with most Commodities, though this move largely has been led by the Precious Metals and Energy. Key support for this decline lies near 1180 just at fractionally lower levels. This is extremely important for the intermediate-term trend, as this represents a multi-year area of trendline support. If broken, and prices move UNDER Jan/Feb lows of 2019, this would be quite bearish for the US Dollar, leading to much lower prices for the Dollar. At present, it's thought that the next 1-2 weeks could lower before support arrives along with a counter-trend bounce. This could allow recent surges in Gold and other commodities to pullback, allowing for better risk/reward opportunities to buy. For now, this weakness in USD along with Treasury yields has been important in providing the crucial long-term breakout in Gold to new 5-year highs. Over the next 3-5 days, it's right to consider selling into commodity and Emerging market gains while buying USD as a short-term trade next week. At present, this is premature.