June 5, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2790-1, 2775, 2762-3, 2743-5
Resistance: 2817, 2831-3, 2840-2, 2864-8
Tuesday Technical Video 6/4/19
Thursday Technical Webinar 5/30/19- SPX, TNX, Crude, Dollar
My CNBC interview from Thursday 5/29 on SPX, and 3 stocks to favor
SPX - (3-5 Days)- Bullish- Rally underway, & exceeding 2801 on a close likely to lift Stocks further into 6/10 before mid-month swoon. Targets are near 2841-50
EuroSTOXX 50- Bullish- Similar to SPX, SX5E has exceeded former lows and right back up to important make-or-break near downtrend at 3350. However, getting over this should allow for a decent rally in the next week before stalling and likely in July. For now 3350 is the main hurdle.
HSCEI- Bearish- Still not enough proof that China is ready to join S&P and SX5E higher and we've seen nearly 2 weeks of very narrow range-bound consolidation. Over 10500 needed for rally, while under 10304 would drive decline.
Trading Longs: XLF, KRE, NDAQ, ICE, TNDM, COPX, QURE, AON, MMC, KHC, SPXC, MNST, ICE, AVB, AEP, ED, WEC
Trading Shorts: SIG, WYNN, LVS, URBN, HTZ, BBBY, KSS, EMR
Rally looks to be underway, with upside targets near 2841-50 for SPX, which if reached on or near 5/10-11, should be used to take profits for trading purposes. Yesterday's lift might have seemed like a surprise to some, but internal breadth had given plenty of advance notice that stocks were holding up quite well despite the breakdown in Technology in Monday's trading, which was discussed. (Looking back, most of that final day washout in Tech turned out to be largely "FANG" and Large-cap Tech, while the broader sector actually had fared reasonably well last week, showing performance that beat out 8 other of the 11 major S&P sectors)
The combination of near-term oversold conditions (but not drastically oversold, like the Media would have us believe) coupled with a return of pessimism, VIX backwardation, and the start of Tech outperformance were all factors that suggested a counter-trend rally could be near. Yesterday's breadth figures came in just shy of a 90% UP day, and advance/Decline was 4/1 bullish while volume was nearly 8/1 into Up vs Down stocks. Five sectors finished up over 2% on the day, and having both Technology and Financials participate and outperform was a big plus. Specifically and more will be detailed in charts below, XLF v SPX has broken out of the entire downtrend since last year. This is a big plus for the Financials group, & I expect continued relative strength in the days, weeks and months ahead.
Yields and Crude oil also managed to lift and these are all part of the same trade, in my view, which bodes well for a rally in Risk assets into mid-month before a pullback. Overall, one should favor being long, looking to buy dips on any chance Wednesday/Thursday for a push higher into next week.
Long XLF with initial targets at 28, with stops under 25.92
Long KRE with targets at 57 and stops under 51.41
Long Copper- HG_F- Expecting an upcoming trendline breakout at 270 that carries prices up to 285-290. COPX might be considered for non-commodity traders at 18.71
Short XLC- expecting pullback to 44.50 and then a max near 43.70- stops at 47.05
Short EEM with targets at 39, then 38.04 maximum
Long XLU targeting 59.85-60 - Buy Weakness at 58
Additional charts and thoughts below.
S&P- Bullish for further gains and push to 2850 possible. Rally managed to exceed prior lows at 2801 from mid-May, and did so on very good breadth of over 4/1 positive. While volume was light, we did see very good participation out of Tech and Financials which is a bullish sign. Getting over 2823 would argue for continued strength to 2841-50 which I believe is possible into 6/10-12 before a stalling out and minor reversal. For now, it's right to stick with a long bias, looking to buy any dips if given the chance Wednesday.
Technology has stabilized far better than what most have given it credit for in the last week. While the FANG names and most of large Cap Tech experienced severe damage on Monday before rising back sharply yesterday, charts show Tech to definitely have stabilized in the last week after the decline from May took most of this group down sharply. This ratio chart of the Equal-weighted Technology index vs SPX shows a mild breakout of this downtrend followed by a pullback Monday and then Tuesday's about face to turn back higher. Overall, this is a bullish development, and should lead Tech to stage a larger rally in the weeks ahead. Given that Tech is 20% of the SPX, this is definitely a positive development after this recent downtrend.
Financials as a group have just exceeded a long-term downtrend from last February's peak that should help to jumpstart this group, just at a time when Yields look to be trying to bottom out after testing the key 2.06% support. This does look to be a technical breakout. and the ability of XLF to SPX to have exceeded prior monthly highs in relative terms should help the group start to show far better relative strength than has been seen in recent months. While a weekly close will mean more than just one day, this is certainly a bullish development which could help to fuel this rally in the weeks and months ahead through the Summer, given that Financials represents 12% of the SPX as the 3rd largest group. This group should be overweighted as a result of the movement in the last two trading days.