June 26, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2905-7, 2878, 2850-2
Resistance: 2952-4, 2960-1
Tuesday Technical Video 6/25/19
Link to Last Thursday's Technical Webinar 6/20/19
My CNBC interview (6/19/19) on Healthcare playing catchup
My CNBC Fast Money interview (6/19/19) on Technology and Chip stocks
SPX - (3-5 Days)- Bearish, but looking to cover shorts Wed/Thursday ahead of G-20 This pullback should prove short-lived into G-20 and insufficient damage has been done to expect a larger correction. Buy dips at 2905 and then 2878
EuroSTOXX 50- Bearish but looking to cover shorts Wednesday/Thursday-Minor pullback to 3400-3415 should find support Wednesday/Thursday and turn higher for a rally to test 3511 area.
HSCEI- Bearish- Pullback likely to reach 10541 and under that near 10288 before turning higher. It's thought that US Dollar finding support should result in a bounce and underperformance out of HSCEI in the weeks to come.
Trading Longs: NOW, IPHI, IHI, XBI, ETSY, TWTR, IOVA, AKBA, MCD, SWAV, KHC, CSGP, FIS, TMO, DHR, AVLR
Trading Shorts: VNO, PLD, SPG, KIM, SLG, HST, SPB, PKG, GPS, UPS, FDX, JBHT, WBA, COTY, APA, SYMC, WDC, URBN
Yesterday's break did look bearish for S&P, breaking uptrends from early June, and was something discussed in the last few reports. However, it's thought that this pullback should prove short-lived into G-20 and it should be right to buy dips potentially as early as Wednesday into Friday which could lead indices back to highs. Support targets lie near 2905 initially and then 2878 which is a Fib based target of the prior rally. Maximum support for a selloff lies near Gann based support near 2850-2, right near the 50% retracement. Weakness should be used to buy this week. While a bearish view is still listed heading into today given lack of proof yet of a turnaround, it is expected to materialize in the days ahead.
A few reasons stand out as being important in this regard: First,momentum remains positively sloped on daily charts, and no evidence of any counter-trend exhaustion was found at recent highs. Furthermore, there is evidence of Semiconductor stocks extending gains after hours while Treasury yields look to be VERY close to bottoming. All of these factors suggest selling should prove minor in the days ahead.
It's also thought that the US Dollar is very close to bottoming near-term, which should result in Commodities turning back lower after their recent bounce, precious metals included. Gold has gotten stretched and near trading targets, and Crude is also near upside targets heading into the OPEC meeting. Thus, if Yields start to bottom out and rally and the Dollar also bounces, this could put pressure on yield sensitive issues further like REITS and Utilities, while also adversely affecting Emerging markets after their recent bounce.
Bottom line, for risk assets, it's thought that weakness proves temporary and buyable
Long XBI with targets back to 94
Long IHI, with targets at 240, stops under 221
Long SMH, looking to buy weakness, with targets at 112
Short VNQ with targets initially near 87
Taking profits on long TLT and initiating long TBT at the opening of trading Wednesday.
Additional charts and thoughts below.
SPX should be nearing an area where this stabilizes and turns back higher ahead of G-20. While yesterday's pullback looked indeed damaging technically, having broken uptrend lines extending up from June lows, momentum remains positively sloped on daily charts, and no evidence of any counter-trend exhaustion was found at recent highs. Furthermore, there is evidence of Semiconductor stocks extending gains after hours while Treasury yields look to be VERY close to bottoming. All of these factors suggest selling should prove minor in the days ahead. Support is listed as 2905, but anything under should not get under 2850 the 50% retracement of the prior rally before turning back up for a rally to 3040-75 into August.
SOX might be close to bottoming out near-term, after MU reported after hours that sales and profits beat estimates in 3Q, and indicated some shipments to Huawei were legal. Technically the chart shows recent lows as having been important in holding up above a minor area of trendline resistance, which acted as support on the recent pullback. A rally back to highs looks likely for SOX, and after hours trading in MU heading into Wednesday showed the stock up 10%, while WDC, and STX were both up more than 3%. INTC, NVDA, and AMD also rose more than 1% after-hours. So if Technology is buoyed by Semis having stabilized and turning higher near-term, this would be a powerful force, given 20% SPX representation for TECH, that could help this recent pullback stop dead in its tracks and head higher. It was thought coming into this week that a pullback could happen, though would prove short-lived. Therefore, this might be part of that process in helping stocks to hold. While trends are bearish given yesterday's break, the next 1-2 days should bring about stabilization.
US 10-Year Treasury Yields should be very close to finding support and turning back higher in the days to come. While charts look technically poor, there are three key reasons to expect yields to turn higher. First, momentum has reached its most oversold level in years on a yield basis. Second, Daily charts have begun to reflect positive momentum divergence, as the yield decline is not carrying momentum lower. Third, Demark indicators are now lining up on both a daily and weekly basis to suggest yields are ready to turn back higher. The combination of these three should make it right to take profits on Treasury longs and sell into this move, expecting Yields to turn back higher, as early as Wednesday-Friday of this week.