December 6, 2018
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2649, 2622-7, 2582-4
Resistance: 2729, 2745, 2764-7, 2787
SPX - (3-5 Days)- Bearish for a move down to test 2722-6 and potentially 2600 in the next 2-3 trading days- Bounce proved minimal yesterday in early trading, getting only to 2720 before stalling and then giving way to selling last night in overnight trading
EuroSTOXX 50- Bearish- Pullback to test 3100 underway- Under will lead to 2900.
HSCEI- Bearish- Test of 10188 and even 10000 is possible but should be used to buy, as China is relatively stronger than US.
Trading Longs: TLT, IAU, GLD,
Trading Shorts: M, LEN, STX, WDC, ATVI, TTWO, KORS, GIS, CCEP, EZU, STX, WDC, ETN, RL, FLIR, EMR, VMC, OI, NFX, WMB, BCO
A couple points to address and despite the market being closed, futures volatility has necessitated a few comments:
The structure has definitely begun to get worse in the last two sessions. The minor bounce failed and now has taken out yesterday's lows. So patterns are suggesting a possible retest now of prior October lows after two failed bounce attempts. While an uptick in fear could hold prices near 2600-22 this go-around, the structure looks increasingly like one that will breakdown eventually given the deep retests. We'll need to see a rally back up ABOVE 2764 to have any sort of confidence that lows are in, which at this point, is nearly 100 points higher.
In terms of fear, we've seen volume Tuesday show some signs of capitulation with 15/1 volume Down vs UP and the highest TRIN reading since January (ARMS INDEX) Yet volume was somewhat low given the holiday and the readings occurred near the highs of the range. Thus we need to be worried we don't recreate 2015 in terms of seeing high TRIN readings near the peak. Most declines that show high TRIN readings above 2.5 are successful in pinpointing lows. As of Tuesday's trading, Equity Put/call and VIX really aren't hitting new highs to suggest capitulation like volume did Tuesday
Long Gold and Silver- Buying GLD, IAU and SLV for movement higher
Long Treasuries with plans of TNX moving to 2.85-7 before stabilizing
Additional charts and thoughts below.
SPX Futures have made a very deep retest and unless regained in the next few days, ie.. a Thursday/Friday move back OVER 2764, this suggests an eventual breakdown, which would undoubtedly violate the trend from 2016. Overall, while the sentiment is starting to turn quickly with lots of disgruntlement and talk of the economic recovery turning, the price action is not giving lots of hope right now, with such a deep retracement. Overall, one should buy into the retest, technically. Yet any break of 2600 is a big negative, and would necessitate hedging/shorting and/or avoiding until markets can stabilize a bit.
Europe, aka, the Euro STOXX 50, or SX5E is in much worse shape than SPX and pulling back to test prior lows after just a minimal bounce. one can see the breakdown in October of a lengthy base and recent retest also failed. The deep retracement should allow for a test of 3100 and eventual break to 2900.
Crude oil turning higher pre OPEC Thursday and looks poised to move to the high 50's. While the larger trend will need a larger move above $58 to think the intermediate-term trend can change, one can make a case technically that the next 3-4 dollars should be up based on this recent alignment.