July 25, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 3000-2, 2968-71, 2962-3
Resistance: 3021-3, 3040-2, 3073-5
Thursday TECHNICAL WEBINAR 1pm EST TODAY
Dial-In Number (United States): (701) 801-1211, Access Code: 840-955-999
Wednesday 7/24/19 Technical Video, discussing SPX, SOX, XLF, XLI
My CNBC interview from 7/23/19 on KO (Coca-Cola)
Link to Thursday 7/18/19 Technical Analysis Video Webinar
SPX - (3-5 Days)- Bullish- S&P regained more than half of last Friday's decline, recouping trend from mid-June. Over 3006 in SPX cash (3010-Futures) would be quite positive for a rally to 3020 then 3040
EuroSTOXX 50- Bullish- Move back above 3500 puts bullish trend back intact. Expect rally to 3600-25.
HSCEI- Neutral- We'll need to see move over 11042 for bullish and under 10632 for bearish.
Trading Longs: CMI, JCOM, BAX, MDT, OLED, DFS, JPM, AYX, SHOP, TWLO, ORI, MNST, TSCO, MYOK, ACAD, IOVA, PCTY, MRTX, SE, AXSM
Trading Shorts: EA, DUK, PEG, BBBY, URBN, TSLA, CTVA, RCL, CTRP, ENR, SPB
Yesterday might have proven to be THE most important day of the week. Not only did the SOX break back out to new highs, but both XLI and XLF made meaningful moves to new highs for 2019. Recall that both Industrials and Financials had largely been consolidating near April highs for the last month, while Technology had reasserted itself as the market leader. While there were signs that Tech could have stalled out as recently as this week, yesterday's push to new highs in the NASDAQ and SOX have kept this steep uptrend of late very much intact. Meanwhile, both Financials and Industrials have achieved minor breakouts, which represents about 22% of the SPX. So while breadth had faltered a bit in the last two weeks, with Advance/Decline peaking on 7/12, yesterday's rebound in these sectors is encouraging in the short run. Both sectors look to make upward progress in the days ahead, and should be overweighted through the balance of July into early August.
Breadth came in nearly 3/1 yesterday, another encouraging signal, and most of Europe and Asia also showed decent followthrough higher. (China continues to lag, however and Emerging markets have continued to show underperformance in recent days with the rally in the US Dollar. Overall, we're getting to a stage in the rally where it should pay to watch carefully for evidence of breadth NOT moving back to new highs with many of the breakouts we're seeing in various groups like Industrials, Financials, and Semiconductors, the latter which are growing quite overbought in the short run. Sentiment should continue to grow more bullish, and it's thought that following FOMC meeting next week, if the Fed drops rates as expected and as the market has priced in, this would set off a very bullish escalation in market sentiment that ultimately should bring in a serious market peak by mid-August into early September (with latest cycle dates signaling 9/14-8 as being important). For now, trends are bullish, and investors should "enjoy the ride" though try to avoid getting too complacent into FOMC.
Long XLF with targets at 30-30.25
Long XLI with targets at 81
SELL EURUSD with targets down at 1.1107
Long GOLD by owning IAU, GLD and also GDX for Gold stocks
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
Additional charts and thoughts below.
Bullish trend breakout in the Value line.. but problems remain- Value Line Arithmetic, the equal-weighted gauge of 1700 companies, finally managed to achieve a minor breakout of its own yesterday with the move to close above June/July highs and finish at 6338. However, it's notable that this index has lagged noticeably, with the recent rally still being well under last September's peak and even further under last January's. For now, the short-term message of yesterday's move is certainly positive. However the broader message is one of concern, barring an immediate snapback to new all-time highs (which should prove VERY difficult to come by into the fall)
A meaningful lift from Financials yesterday, with XLF breaking out to the highest levels seen since last Fall. After recent consolidation near April highs, this is a very constructive move out of this group (based solely on the XLF move, which has understandably high weightings in BRK/B, JPM, WFC) While yields are gradually bottoming out( and the same happening with Yield curve arguably) Financials have gotten a notable "Liftoff" technically per yesterday's XLF move. This is constructive near-term technically from a pure pattern perspective and bodes well for further strength in the group. One should overweight Financials between now and early August.
Industrials Bullish near-term- XLI managed to lift to the highest levels of the year, per XLI, and further upside looks likely to a strong resistance zone formed by both January and September highs at 80.25 to 80.66. Moves like this can often be quite important technically when highs spanning back several years are exceeded by daily and particularly weekly closes. While Transports have been a notable laggard, and will still need to be watched carefully in the weeks ahead for signs of continued negative divergence, for now, this is a bullish move for XLI, and should be followed in the short run.
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