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Post Powell plunge should affect market negatively in August

August 1, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com

SPX Cash Index

Support: 2962-3, 2954-6

Resistance: 3021-3, 3040-2

Technical Analysis Video Webinar, 15 mins. Today 1pm EST- https://join.startmeeting.com/info69336

Dial-In Number (United States): (701) 801-1211, Access Code: 840-955-999

Wednesday Technical Video, 7/31/19

https://stme.in/ZOFv6TxNO8

Link to last Thursday Technical Webinar 7/25/19- 20 min Analysis

https://stme.in/TntiR5jFDJ

My CNBC interview from 7/23/19 on KO (Coca-Cola)

https://www.cnbc.com/2019/07/23/coca-cola-still-has-room-to-run-always-buy-all-time-highs.html

SPX - (3-5 Days)- Bullish- Worth buying dips given that prices held where they needed to near former April highs (which cushioned equities on their first retest and bounced ) Movement below 2954 would be bearish, while holding above still gives a chance for 3035-3045.

EuroSTOXX 50- (3-5 days) Mildly Bullish- Europe seems to have begun more of a near-term topping pattern than has been seen in S&P with yesterday's pullback to the lowest levels since 6/28. For now a snapback rally into end of week is possible, but momentum seems to be slipping and it will be necessary to regain the losses of the last few days quickly to avoid a larger break in August. Resistance lies at 3500, 3570-5 and then 3600-25.


Trading Longs: GBTC, IFF, PPG, AMZN, ETSY, GSK, BG, LMT, TTD

Trading Shorts: SIG, KSS, EAT, XRT, OSTK, SNAP, BLUE, EA, BBBY, URBN, TSLA, CTVA, RCL, CCL, CTRP, ENR, SPB

S&P got its first real jolt of volatility which managed to break the prior mild trend discussed in yesterday's report. Prices plunged down to 2954-7, an area of support formed by April highs in S&P (As the saying goes, former highs often will act as meaningful support when revisited.) Prices did manage to bounce moderately off that level, but by the close still finished with losses of 1%. Under 2954 is bearish, while over, bullish.

Going forward, it looks increasingly likely that yesterday's plunge served as the "shot across the bow" for equities and should affect momentum negatively enough that rallies from this point on into early next week, if any, should serve as selling opportunities for a pullback in the month of August. Resistance lies near 3035-45 while support is on 2954.

ACTION PLAN-

Long XLF with targets at 30-30.25

Long XLI with targets at 81

SELL EURUSD w/ bounce from 1.11 proving temporary and selling off to breach 1.11

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.

Image 8-2-19 at 4.42 PM.jpg

S&P decline yesterday got down to the area of the former April highs, which managed to offer support before prices bounced off the lows. The broader trend will not really begin to give way until 2954 is breached. Yet, momentum is going to start to wane badly over the next few days, and it's thought that yesterday should serve as a "shot across the bow" for S&P and that upside from this point into early August should be limited before a more meaningful pullback.

Image 8-2-19 at 4.42 PM.jpg

A big surge in the US Dollar yesterday post Powell comments, which has directly coincided with Emerging markets breaking support along with precious metals turning down sharply. This Dollar rise, interestingly enough has now reached the highest level in 2 years, and while many belived a dovish pivot by the Fed would coincide with Dollar weakness, this seems to be affecting the rest of the world in bigger fashion in the short- run. Counter-trend sells are now in place for the Dolllar, via TD Combo sell signals, which likely do suggest this recent strength in USD could prove short-lived. In the short run though (meaning next 2-3 weeks ) we could see commodities underperform along with Emerging markets.

Image 8-2-19 at 4.43 PM.jpg

Emerging markets breakdown is a negative near-term, (EEM) which is directly happening coinciding with yesterday's Dollar strength. This suggests that EM might underperform Developed markets into early August and should be avoided until the Dollar can show more evidence of backtracking and turning back lower.




Disclaimer:

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