May 17, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2857-7, 2752-3, 2838-39, 2785-7
Resistance: 2891-3, 2898-2900, 2918
Thursday's Technical Analysis Video Webinar-5/16/19
My CNBC interview on GE General Electric Technicals- 5/8/19
My CNBC interview 5/8/19 discussing Technology
SPX - (3-5 Days)- Bullish- Buy early weakness- Prices exceeded 2862 in a broad-based rally yesterday on higher volume, breaking the downtrend and arguing for a bit more rally to close the week. Downside support of 2852 should now hold on pullback attempts. Targets should be 2918, then 2954
EuroSTOXX 50- Bullish - Above-avg gains have recouped over 60% of prior decline. Targets 3458, then 3514. Under 3311 is bearish.
HSCEI- Bearish-Minor bounce but has failed to make much progress, and Rising US Dollar could result in underperformance. Trend unlikely to exceed 11151 before turning down for a final pullack to this decline which could hit 10526 as maximum support before stabilizing and showing a stronger rally
Trading Longs: MNST, MHK, FLS, CMG, F, GM, GE, COST, TMUS, TNDM, COUP, LIQT, GRVY
Trading Shorts: EEM, M, SIG, LVS, EMR, DVN, NOV, AOS, OSTK
Prices managed to push above May's downtrend line resistance, in SPX, DJIA and NASDAQ Composite which was seen as a real positive on a day which finally managed to show some broad-based participation with 3 sectors up more than 1% on the day: Financials, Materials and Discretionary, while Industrials, Technology, Telecom and Staples all came very close. Breadth finished at a bit more than 2/1 positive, and while prices slipped a bit into the close, the net effect was still viewed as positive after indices looked to be near important levels. Unfortunately the news is not all bullish, as daily momentum remains negatively sloped and SPX still showed less than 50% of all stocks above their 50 and 200-day moving averages. Followthrough in the days ahead wiill be crucial to the success of a push to new highs with downside being limted to support near 2852. As stated above, under this would warn of a deeper retracement and possible test of lows.
Key developments for Thursday centered on the US Dollar pushing higher vs Yen and Pound Sterling while achieving a minor breakout vs the Euro. This looks to be important in causing underperformance in Emerging markets, specifically China, along with commodities in the days ahead. Meanwhile, Treasury yields look to have made an important "About-Face" the other day with yields on the 10yr getting down to near the key 2.33% before bouncing back above 2.39%. The net effect was a period of weakness for the Metals. While a move back above 2.50% would likely lead to further near-term pullbacks in Gold, for now Yields need to show much more technical improvement after being down the last 3 of four weeks.
Long TBT with targets initially at 33.40 and breakout above leads to34.47, and then 36
Long GLD with target 125.90-Stop under 120.77
Long XLP with target at 58.90 and stops at 56.19
Additional charts and thoughts below.
S&P- Gains have broken 2862 which was seen as a positive in breaking the downtrend from early May. Breadth expanded on the move and volume picked up yesterday vs the prior session, both positives. At present, after 3 days of gains, S&P has managed to claw back over 50% of the decline thus far. Momentum hasn't turned up all that much thus far however, and remains negative based on popular gauges like MACD. Provided that S&P now stays over 2852, the swing high from earlier in the week, this trend will have a chance to follow-through. Seeing key groups like Financials and Healthcare participate in the days ahead would be a good sign.
Semiconductors have been noticeably absent from the recent rally and have underperformed dramatically of late. After the steep selloff that broke uptrends from last December, we've seen just a fractional gain in the SOX. This is an important leading sector, and key part of Technology. Underperformance won't help to give much confidence in the Tech rally until SOX can regain the trendline that was broken. After hours earnings news saw NVDA gain nearly $10 from 160 to 170 in price before giving back all those gains during the conference call. Other stocks like AMAT were higher after hours, but it will be key to maintain these gains and try to jumpstart a rally in this sub-sector, which for now, remains a very big laggard.
Emerging Markets likely face further selling pressure. As this daily chart of EEM shows, we've seen hardly any bounce in EEM after a 9.5% decline from early May. The lagging in performance was accentuated by Asian markets like China, Taiwan and Korea which have all plummeted lately, but others like Brazil have also broken down and shown real technical weakness. Overall, i expect EEM to pullback to test lows into next week and downward momentum could be strong enough to result in a retest of former lows.