June 7, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2825-7, 2800-2, 2790-1, 2728-30
Resistance: 2856, 2860-3, 2869-71, 2876-8
Link to 6/6/19 Technical Webinar: 20 min, covering SPX, TNX, DXY, Crude, Gold
Real Vision Interview, 6/3/19, discussing SPX, TNX stabilizing & moving higher
My CNBC interview from Thursday 5/29 on SPX, and 3 stocks to favor
SPX - (3-5 Days)- Bullish- Rally should get to 2860-3, or 2871-8 before stalling out, potentially as early as Monday, or Tuesday of next week. While the short-term trend is bullish, we're likely to stall out into early next week.
EuroSTOXX 50- Bullish- A bit more rally likely into early next week, but similar to SPX, likely could stall into mid-month and backtrack. For Friday into Monday, still early. Targets at 3411
HSCEI- Bearish- Still early to buy. Thursday's weakness seems to suggest pullbacks to 10100 can happen. 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: MET, FIS, PODD, TMO, DHR, AVLR, CDNA, MOH, MNST, NDAQ, ICE, REXR, DRE, CSGP, FSV, MOMO, KIE, XLF, KRE, TNDM, COPX, QURE, AON, MMC, KHC, SPXC, AVB, EIX, AEP, ED, WEC
Trading Shorts: XLC, FOSL, BBBY, GME, URBN, GES, ANF, FXI, EEM, SIG, MO, PM, WYNN, LVS, EMR
Further gains look likely on Friday into early next week before any temporary peak is at hand. While intra-day momentum is nearing overbought levels, there remains a lack of counter-trend exhaustion that would argue for any kind of peak. While momentum and breadth have been sub-par on this week's bounce, there's been some constructive developments with regards to short-term structure that have argued for a rally. Sectors like Healthcare Industrials and Financials have shown signs of participating this week, and while it's been still quite Defensive in nature, it remains early to sell heading into Friday.
Outside of lackluster breadth and momentum, another concern is the lack of a sharp rally in both Treasury yields and Crude oil, which both have correlated quite positively with Equities. Yields still look weak, despite a few days of stabilization, and Crude oil also has failed to follow suit to the Equity rally. This coupled with the fact that Small and Mid-cap sectors are hitting new monthly lows vs the broader market is a concern heading into mid-June. While a lack of a trade agreement might be thought to be bearish to some, it's really the non-participation in Small and mid-caps and breakdown in breadth that should be a warning heading into next week. We'll discuss this in greater detail in the Weekly piece. At present, I expect Friday to be bullish into next Monday, and would look to sell gains above 2860 in SPX.
Long IHI, with targets at 240, stops under 221
Long XLF with initial targets at 28, with stops under 25.92
Long KRE with targets at 57 and stops under 51.41
Long XLU, targeting 61.25-61.50. Buy weakness at 58
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
Additional charts and thoughts below.
S&P Bullish for a bit more gains into next week- As of yesterday's close, S&P got right near initial targets, yet most time counts suggest it's still early for a top. Thus, a long stance is still right into next week, looking to buy any weakness given the chance early Friday. Upside targets could come about near 2860-2, or above near 2871-8. It's thought that 6/10-12 could usher in a temporary peak, but that any weakness should be buyable. Trends have improved near-term, yet breadth and volume have been sub-par
BULLISH on Medical Devices and Healthcare overall for the next 4-6 weeks, maybe longer. US Medical Devices ETF, ( IHI ), managed to exceed the downtrend of the last few months, as XLV also engineered a breakout of its own yesterday. This should help Healthcare to begin outperforming at a time when the group is heading into a very bullish seasonal time, which tends to show very good relative strength for Healthcare. Specifically, the Medical Devices stocks have taken the lead in this regard, and stocks like BSX, DHR, MDT and others have shown very good technical strength that likely helps these stocks continue.
Small caps have gone exactly opposite the direction of broader Equity indices in the last week, with RTY to SPX in ratio form breaking down to the lowest levels in years. This is not constructive to intermediate-term breadth, and it's thought that on a further rally into the Fall, both Small-caps and Mid-caps likely would underperform. For now, Large-Cap Growth remains the place to be, and Russell 2000 looks like a laggard and has trended lower relatively since late last year. Thus, while the near-term trend is bullish for Equities and intermediate-term also likely stays bullish for a few more months, this deterioration is something to keep a close eye on in the weeks and months ahead.