July 12, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2968-71, 2952-5
Resistance: 3008-10, 3021-3, 3040-2
7/11 Technical Webinar Link, discussing SPX, TNX, DXY, Crude, Gold
My Real Vision Interview filmed on 7/2/19
CNBC Fast Money- 6/26/19- 3 Laggard DJIA stocks that should play catchup in Q3
SPX - (3-5 Days)- Bullish- Further strength likely to either 3021-2 or 3041-3 in S&P futures which requires one more push higher in the near-term
EuroSTOXX 50- Bullish- Move over 3514 opens up door for push to 3600-25
HSCEI- Bearish- Under 10640 should lead to 10465 over next few days, but only under 10029 should pullback last more than 2-3 days. Over 11042 is bullish
Trading Longs: USB, TSCO, MYOK, TNDM, MNST, OGE, TWTR, PEG, ACAD, IOVA, TPB, PCTY, GLDD, MRTX, SE, AXSM, ZIXI, MCD
Trading Shorts: CTVA, CCL, RCL, ATVI, CTRP, ENR, SPB
Markets have begun to show some signs of fatigue lately, despite the lack of any meaningful weakness. While US Equities have already shown stellar returns through the first couple weeks of July, to the tune of nearly 2% for SPX, making its YTD Returns almost 20%, breadth has begun to falter a bit in recent days. Yesterday showed flat breadth yet again on the rally, and finsihed with more stocks declining than advancing. Additionally, the percentage of stocks trading above their 10-day moving average has dropped since peaking in late June near 88% and now stands at 65%. So despite markets moving higher to hit new records daily ( The FInancial media has gone through extra efforts to discuss SPX 3000, DJIA 27k) fewer stocks are trading above their 10-day m.a. than 2 weeks ago. Morever, Demark indicators are now within 1-2 days of signaling exhaustion on daily charts, and have a potential weekly confluence as well. Overall, much of this just means that investors need to pay attention extra closely in the days ahead and not become complacent. While Fed-Speak might have made the market more comfortable, technically all is not as good as prices might be reflecting in the last couple weeks.
Sector wise, Technology now looks to be near resistance (See chart below) and Industrials has stalled out a bit, while Healthcare also has been churning of late (Thursday's White House decision to pull the plug on Drug-Rebates caused some interesting bifurcation in this sector, with CI, UNH, CVS, HUM, ANTM all rallying more than 4%, while MRK, LLY, NKTR, REGN, BMY fell more than 3%.) Financials, meanwhile, look to be picking up steam, and has outperformed admirably as rates have turned back higher. The 2/10 Spread looks to have steepened out quite a bit in recent days and now up to 27 bps. One of the key concerns, sector-wise has to do with Transportation lagging badly, and this will be something to monitor heading into the back half of July
Long USO with targets at 14.50
Long FANG basket, with AMZN, FB, NFLX being key stocks of focus
Long TBT with targets at 32
Long USDJPY with targets at 111
Long XBI with targets back to 94; Stops on weekly close under 82.87
Long XLV with targets at 95.50, then 100
Long SMH, raising targets to 120
Additional charts and thoughts below.
SPX traded in a very tight range yesterday as part of its uptrend from early June. While there are some minor signs of stalling out, we'll need to see price break last week's lows to have any confidence that a pullback is upon us. For now, counter-trend exhaustion remains premature and groups like Financials appear to be showing more strength. Overall, it looks right to sell into strength to 3020 while awaiting more evidence of trend failure and break of uptrend before turning too bearish. Thus, remaining above 2952 with no counter-trend sells leaves the trend bullish.
Financials looks to be continuing to make steady progress, with XLF firming after testing prior highs and still looking to rally in the weeks ahead. Broker-dealer stocks made the technically more significant move yesterday to the upside, but both Regional and Money center banks should be well poised to make further progress as yields rise. Overall, i like overweighting Financials with the yield curve and yields rising, and this group could prove to be a better risk/reward into late July than Technology.
Technology- Time to take profits? Tech looks to be nearing a possible area of resistance after a very good rally in recent weeks. Charts of XLK show prices nearing a minor resistance trend formed by connecting highs since last Fall. (These have more importance than looking at a breakout of prior highs from April, as the April peak itself just marginally exceeded last Fall before peaking) Counter-trend exhaustion could be in place by Friday, and might lead to a temporary stalling out in Tech. Many of the "FANG" names that ive discussed this week as bullish technical candidates reversed yesterday after several days of above-average gains. Overall, Tech remains the group to focus on for those eyeing when markets could start to stall out, as it remains 21% of SPX.
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