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10 Longs to consider for the "final" leg of this Push-Up into FOMC/August

Summary: Equity trends are bullish, but likely encounter strong resistance into early August. As last week's Weekly Technical Perspective stated... Markets are nearing an important juncture where further gains should prove to be far more difficult to come by in the months ahead. Nothing has changed about this narrative given the price action of last week, technically, despite the push back to new all-time highs. Markets have arrived at a period where economic data has improved in recent weeks, yet the Fed fund futures market is still pricing in 1/4 point drop from the FOMC when it meets 7/31. The act of cutting rates while economic data is arguably still fine is interesting to ponder... Is the FOMC being unduly influenced by POTUS? Is the Fed considering European and global data which seems to be slowing and acting preemptively? Overall, the FOMC seems increasingly "boxed in" where it's arguably a bit out of sync with markets, a situation which can bring about volatility. Regardless, when considering this week, the Fed will not want to disappoint the market, and as such, whether or not the Fed cuts is not really up for debate. As to whether its warranted, well that's a different story completely.

Technically, its right to say breadth improved over this last week, largely given Wednesdays push up to test 7/15 highs. Financials and Industrials showed signs of breaking out to new 2019 highs this day, along with the SOX also pushing back to new all-time highs. Momentum on both Daily and weekly charts shows RSI readings in the 60's. (14 period) Not excessive, and sentiment remains not as optimistic as might be expected with Markets at new highs.

However, it IS expected that markets slow in the weeks ahead. To rehash some of these concerns, they primarily deal with 3 key reasons: 1) Near-term overbought conditions in sectors like Technology, which now face increasing regulatory pressure 2) Seasonal cycles which historically have been negative for stocks in the Fall months of a pre-election year 3) Counter-trend exhaustion which historically is important to pay attention to following a steep uptrend (Note, these will be in place at the end of this current week for the first time in 2 months. So it's thought that the trend between now and year end should be neutral- Down from August into October to the tune of 7-10%, and then a rally into year end which could recoup that same amount.

Important Developments of this past week (Shown in Bullet form)

SPX, DJIA and NASDAQ are all nearing upside targets which could be hit later this coming week into FOMC. The time count of counter-trend exhaustion signals coincidentally happens to line up exactly with this coming week's Fed meeting, which makes a reversal an above-average possibility

Breadth indicators like Advance/Decline rallied after last Wednesday's advance, and has pushed back to near all-time high territory. However, the slowing in breadth since early July is expected to potentially create a top in A/D into early August.

Treasury yields have stabilized in the last five trading days, but it will take a move back over 2.148 to expect a push to 2.25%. Patterns on Treasury yields look increasingly to be bottoming, and might start to spike post FOMC.

Emerging markets are still lagging domestic Equities but very little overall progress in either direction over the last few weeks. Most of the EM space has not kept up with SPX pushing back to new highs.

Sector-wise, Technology has climbed back above former peaks to new all-time highs an Equal-weighted ratio basis vs market, while Semiconductor indices like SOX have also made new all-time highs. However, near-term overbought conditions coupled with Exhaustion indicators suggest this coming week could be important for this sector stalling out. For this coming week, Tech should still outperform.

Defensive sectors underperformed last week, and should show further lagging behavior into August before any temporary bottom. It's right to avoid REITS, Utilities and Staples into August, technically.

The US Dollar looks to have made meaningful headway last week that should drive the Dollar higher vs many domestic and Emerging market currencies over the next 1-2 weeks. This is a primary reason why EM has underperformed and Commodities have stalled. Rally to 98.50 looks possible.

Sentiment is still largely "dicey" with AAII having contracted back down to flat in bulls vs bears, with equal positioning. Thus, it's likely that equities rally as sentiment is poor but any encouraging rhetoric out of the FOMC could help this improve just as equities are nearing resistance.

SPX- Bloomberg- Daily- Move to 3040 looks to be underway

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SPX- Daily- Bullish but nearing upside targets - The uptrend remains very much intact, and not much concern when just eyeing daily charts for evidence of how price is trending. The real key lies with counter-trend exhaustion that will be in place within 4 trading days. The fact that this lines up and will be complete right as the FOMC is meeting is coincidental, but also suggests that markets could be ripe for reversal starting at the end of this week as July comes to a close.

SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish- Move to 3041-75 likely The rally up to 3040 looks to be underway and very well could overshoot into 3075, but technically i expect this area to prove important and a place to consider taking profits into FOMC. Targets are arrived at based on several different Fibonacci extensions of prior highs and prior high to low swings, as well as other low to high ranges. Gann resistance also lies directly above, and given that markets are getting so close to these targets, while also reflecting counter-trend sells potentially later this week creates an attractive risk/reward to sell into. For the final few days of July, it's right to favor Financials and Industrials most likely for further gains, while expecting that Tech also has a bit more "in the tank" for this week before stalling out and reversing post Fed. But on a 3-5 day basis, with no technical reason to support a decline here, it's right to favor this rally continuing a bit longer, and it looks right to hold off until Thursday/Friday to start trimming longs.

Intermediate-term (3-5 months)- Neutral- i expect a rally into Aug/Sept.. a decline into late Oct/Nov and then a year-end rally which very well could put prices right back to similar levels they are now. Overall, an SPX rally higher to 3040-70 likely into August before any meaningful peak, but the risk/reward is growing poor, and one should consider taking profits into August. While momentum has turned back to bullish on a daily, weekly and now monthly basis, we've seen some pretty chronic negative momentum divergence on weekly and monthly charts with higher prices in SPX not able to carry these gauges to levels anywhere near what was registered back in January 2018 when most peaked. The "All-stocks" Advance/Decline has moved back to new all-time highs which is a positive, but yet far fewer stocks are hitting new 52--week highs than was seen last year or in 2016-7. Furthermore, only 53% of stocks are now above their 200-day ma despite SPX being at new highs (This compares to 75-85% over the last couple years) Overall, trends and momentum are bullish and sentiment is just gradually getting more positive (but not yet complacent) despite markets being at new all-time highs. It's thought that our recent Jobs number for July could start to help sentiment become more constructive. For now, the next 4-6 weeks from July into August should be bullish, but after August, a material slowdown is expected based on the combination of market cycles along with negative momentum divergence, and a confluence of Demark based "sells" (Exhaustion) Overall, technically, i expect the balance of the year to largely come out near current levels, but should show a fair amount of volatility this fall. Stay tuned.

10 Equities and ETFs that look technically attractive for further gains into early August before a market peak

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Amazon.com (AMZN-$1943.05) The pullback of nearly $100 off recent highs on 7/11 (2035.80 down to 1943) should represent an attractive area to buy dips for a reversal back higher which should take AMZN to new highs into early August. The ascending triangle pattern looks bullish technically and the breakout last week consoldidated, as opposed to showing immediate follow-through. Given that near-term momentum is not too overbought and counter-trend Sell signals via Demark indicators are still premature, it's right to consider this minor backing and filling a "gift" for those looking, with support either here at 1943, or below a t1893 that should prove to be an attractive risk reward for a lift into 2076. While former highs in September were considered an area to lighten up initially, a subsequent retest shouldn't encounter too much there to slow prices down.

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J2 Global (JCOM- $91.51) Last week's lift above 91 managed to exceed both April-June 2019 peaks as well as last June highs, which effectively breaks this resistance above highs since 2017. Further gains look likely up to 100 in the short run, as this "double bottom" as part of the larger uptrend could accelerate on a breakout of the two-year consolidation near the highs. Momentum is not overbought, and counter-trend exhaustion is premature. Thus, the breakout looks to extend just at a time when the S&P should push higher into 3040 or a bit higher into early August. Unless 87.75 is breached, it looks right to stay with longs and use minor dips to buy, if given the chance early in the week.

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Becton Dickinson (BDX- $254.39) BDX breakout of this symmetrical triangle pattern bodes well for further gains, with targets up near 266 initially and then 280. Momentum on daily charts turned a bit negative on the sideways action since early July, but last week's breakout on Wednesday followed by two days of consolidation should bring about a very good risk/reward for this upcoming acceleration. While Healthcare has been a poor performing sector of late, the medical devices stocks like BDX have acted quite well, and IHI is back at new all-time highs. Thus, given the sub-sector strength, BDX looks to be finally joining suit to show some strength in one of healthcare's best performing sub-sectors. It's right to be long, with stops under 250, expecting rallies up to 266, 280.

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ETSY- ($70.86) Last week's bullish close at the highest levels since early March bodes well for further gains, and technically ETSY looks attractive for additional upside. This directly followed the high volume breakout that carried the stock from 55.86 to 73 in one week's time back in early March. Last week's volume also spiked on the gains, outpacing the last few weeks, and should lead to a test and breakout back over 73 in the weeks ahead. The uptrend in this stock, as shown on weekly charts, remains very solid indeed and shows the minor pullback into late May not violating the longer-term trend. Thus, while many might seek to avoid ETSY after the move from 61.37 to 70.86 over the last few weeks, this looks to be part of an improving near-term picture that already had shown some excellent intermediate-term strength. The area at June highs near 71.80 might serve as a temporary headwind, but is thought to be ripe to be exceeded for additional upside to new highs. Thus, ETSY looks bullish, and it's right to give this one consideration based on its technical pattern.

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S&P Regional Banking ETF (KRE- $55.36) Regional banks look attractive for gains in the weeks ahead, and KRE should be overweighted for the possibility of a move to the upper 50s/early 60s. Given the breakout in XLF last week, it's right to take a look at what might be the stronger part of Financials. Regionals look to have taken a clear path higher vs KBE, and this weekly chart of KRE shows the breakout of this trend going back since Summer 2018, when KRE peaked out. Following a couple former unsuccessful tests, last week's move above $55 looks to have been successful in breaking this downtrend. Gains look likely and KRE should be favored for outperformance into August.

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Monster Beverage (MNST- $65.20) Bullish for a breakout post earnings. This recent constricion in the stock price in recent weeks is part of a larger base in the stock and normally precedes a large move. The act of holding near the highs of this consolidation is considered quite positive technically and it looks right to position long ahead of Earnings, thinking this pattern will be resolved by an upside breakout. Movement above $66.35 would represent a chance to add to longs, expecting a push into the 70s. Meanwhile, any decline back under 60.50 would be a negative and postpone this rally.

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Shopify (SHOP- $336.54) This recent basing in SHOP since mid-June as part of the larger uptrend is particularly bullish for further gains, and it's right to be long expecting a lift-up out of this base, up to $360. Momentum is not all that overbought given the consolidation, and last Friday's lift up above 336 represented new all-time weekly closing highs. Movement to 360 and then 374-5 looks possible, and it's right to be long, looking to buy dips.

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Trade Desk (TTD- $278.55) TTD looks quite bullish given last week's thrust back to new all-time high territory, and the stock pattern has begun to show evidence of this stock really beginning to accelerate lately. Over the last seven months, we've seen evidence of this nearly tripling in price, but yet it continues to move in a very stair-stepping manner that has prevented momentum from growing too overbought. While last week's gains might seem excessive, any dips this coming week would provide an even better risk/reward for this stock technically, as upside targets look to be near $300 initially and then $20. Volume spiked on last week's rally, and suggests this should still be an attractive stock to consider even after last week's gains. Only on a move back under $223 would the trend shift and rallies would be postponed, which is not expected.

S&P Healthcare Services ETF (XHS- $68.25) Bullish for further gains into the low 70s to challenge and then exceed early year highs. While healthcare as a group has lagged lately and still looks to lag into August, groups like the Healthcare Services sub-sector have been steadily improving in strength after having underperformed meaningfully since last Fall. Last week's push up was important technically, and should serve as the technical catalyst for XHS to begin to show more convincing relative strength in the weeks to come.

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Twitter (TWTR- $41.52) TWTR finally broke out of its consolidation triangle last week, something which is considered quite bullish technically and bodes well for further strength to the high 40's. TWTR had languished for some time in recent months, underperforming other Social media stocks. This breakout last week exceeded prior highs and pushed up to the highest level of the year on heavy volume. While seemingly overbought on intra-day charts, neither nor weekly charts are all that overbought given the length of consolidation this has shown since last year. Movement higher to challenge last Fall's highs looks likely, and over this would result in more meaningful intermediate-term strength to the mid-to-high $50's.

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice. Newton Advisors, LLC has no duty or obligation to update the information contained herein. Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report: TWTR, ETSY, & MNST. This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

G-20 progress should lead to push back to new highs; Buy Financials- 5 to Consider

July 1, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2919, 2911-2, 2874, 2845-6

Resistance: 2963-4, 2971-2, 2985-8



Summary: Gains back to new all-time highs for multiple US indices look likely sooner than later, as trade tensions seem to be easing at a time when technicals have improved based on June's strength, while sector rotation has made a number of very important positive moves in recent weeks. While it was just SPX that moved to new high territory lately, DJIA and NASDAQ remain within striking distance, and this past weekends G-20 news should serve as a bullish catalyst for Stocks to push back to new highs. Specifically the following seem important and positive developments: Financials and Transports both made outsized gains late last week, driving XLF up test a very important area of intermediate-term trend resistance (which after multiple retests, looks to be broken) Meanwhile the move in Transports carried this sector back up to the highest level since May. Moreover, Technology has slowly but surely recovered, with the Semiconductor gains helping Tech to regain about half of what it's lost since April. Additionally, defensive sectors like Utilities, Consumer Staples, and REITS all fared poorly, dropping greater than 1% on the week, and representing three of the four worst performing sectors. Thus this rotation back into "risk-on" type sectors while exiting Defensive groups was considered positive, particularly as no details of the G-20 had been released when this rotation was ongoing.



Additionally, indices like DJIA made new all-time high monthly closes, and breadth and momentum has been slowly improving given June's gains. It's also important to note that the NYSE "All stock" Advance/Decline has pushed back to new all-time high territory as of last week, on daily, weekly and monthly charts. Thus, structurally, US indices remain in good shape technically on daily and weekly charts and additional gains seem likely in the month of July, though likely could turn out to be a choppier rally than what was seen last month.



The negatives at this point have to do with Small-caps and Mid-caps continuing to move to new weekly and monthly lows vs the broader markets and it's really just Large-caps that have remained immune in recent months. Additionally, the number of NYSE new 52-week highs has bounced in recent weeks, though is well below levels seen back in 2015-7, and this is also a source of concern. Momentum on monthly charts seems to carry the loudest warning, and indicators like MACD remain negatively sloped and others like RSI have made lower highs since peaking out in very overbought territory back in January 2018. Thus, the negative momentum divergence looks to be an ongoing problem and won't disappear anytime soon, even with a move back to new highs in unison among the indices in the month ahead. However, until prices turn down sufficiently, it's right to stick with stocks



Outside of Stocks, both Treasuries and the US Dollar look to be on the verge of a larger turn back higher in the days and weeks ahead. This could take the form of a brief move to 1.90-5% for TNX and then turn higher to 2.25-2.30%, while DXY shouldn't spend too much time under 96 before turning higher to 97-97.50. This likely causes some stalling out in Emerging markets, which have proven strong over the last few weeks, but whose outperformance is thought to be temporary at this time.







Important Developments of this past week (Shown in Bullet form)



Given trade progress, electronic trading Sunday evening 6/30 shows Asia gaining ground while US equity futures are up sharply by +0.75-1.00% as the Yuan rallies. Meanwhile, Yields are bouncing, Crude has moved right under $60 while Gold has dropped back under 1400. (SUNDAY EVENING)



US indices remain within striking distance of all-time high territory heading into this past weekend's G-20. Momentum is bullish and not overbought, while Europe remains just below April highs and should get there this week.



Emerging markets have rallied given the recent decline in the US Dollar, but are likely to stall out this week given signs of Dollar nearing important support. China has been a laggard on the bounce back, barely recouping 38% of the prior decline from April



Breadth was constructive on last week's rally, but yet still meaningfully below levels hit back in February, according to McClellan's Summation index, a smoothed version of the Advance/Decline. The overall All-stocks Advance/Decline has successfully pushed back to all-time high territory



Treasury yields look close to turning back higher, which should occur within the next week. Downside targets on yields lie at 1.90-1.95% and further Treasury gains are thought to prove muted. Look to sell Treasuries on any decline ni yields this coming week, expecting a turn back higher to 2.25-2.35% into August.



US Dollar still shows a negative trend after last week's gains failed to exceed prior lows from early June. One can't rule out a final pullback to test Tuesday's lows at 95.84 in DXY but should be close to reversing course for a more meaningful rally in the weeks ahead.



Financials outperformed all other major sectors with gains of 1.47% in S&P GICS level 1 sectors last week, while Materials also showed strong performance thanks to MOS, BLL, AMCR, ECL, AVY, ALB, all higher by more than 3%. Financials are thought to be very close to a larger breakout



Defensive sectors underperformed badly which might seem odd given the lack of yields turning higher while a great amount of uncertainty remain in place ahead of this past weekend. However, outflows from Defensives is seen as a real positive for risk assets.



Crude oil stalled after reaching near-term resistance just under $60 ahead of this week's OPEC conference. It's thought that 60 should prove to be difficult to exceed, and Crude might consolidate its recent bounce following OPEC.



Precious metals began a much needed pullback given rampant overbought conditions with the US Dollar and Yield pullback, causing a giant breakout in Gold on an intermediate-term basis. Further near-term declines are possible for Gold as yields start to climb along with Dollar stabilization, but should represent an excellent buying opportunity into late July.



Small-caps and Mid-caps remain bearish, technically and relatively speaking remain at multi-week lows relative to Large-caps. While near-term stretched, the inability of Either of these groups to participate likely is a concern into Fall.



Sentiment has been fairly muted despite index gains of nearly 6% for June, with much of the uncertainty related to the FOMC meeting and Trade tension. On this latter part, easing tensions would create more optimism, which likely peaks in August with a possible market top.





SPX Cash index-

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SPX overnight gains should carry this back to test and break out above April highs which should allow for a push up to over 3000 over the next 30-45 days. Near-term, this area at 2965 from last week should be important, but currently is being retested in Futures as of late Sunday evening. Given the level of uncertainty headed into this past weekend's G-20, S&P likely has a positive July, performance wise. Momentum and breadth have improved while structurally indices are still in good shape and sentiment will need to get far more bullish before thinking any sort of serious peak is near.




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish- Overnight progress for US Equity futures likely should carry most US Indices back to new all-time highs early in this holiday shortened week. SPX targets above 2964 lie near 2983-5 and then up near 3000. While not expected, reversals back down under 2912 on a close would postpone the rally. For now, it's thought that overnight gains are right to follow, and its right to be long into the July 4 holiday








Intermediate-term (3-5 months)- Bullish- Move higher to 3040-70 likely into September before any meaningful peak. May's pullback, has not been sufficient to turn intermediate-term trends negative. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far and SPX remains just 6.5% off all-time highs. The one important Technical negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. Weekly momentum, has just joined Monthly in being negative, so at present, we have Daily, weekly and monthly MACD all negative. However, for now, price weakness has proven fairly benign, and we'll need to see some evidence of more serious breadth deterioration and more bullishness to have concern on an intermediate-term basis. Advance/Decline for Equities did peak out with indices in early May, while the Summation index has been negative since February. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020. However, the time period from mid-September into November could set the tone for 2020. Stay tuned.







10 Charts of Financial space, Sector ETF's, Relative charts and 5 attractive Financials to consider here

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XLF- Further gains likely given last week's progress, while Financials as a group lies near a very important long-term resistance area. Given the multiple retests of this long-term trend, this recent challenge from last week could very well mark an important breakout to this entire trend since last year. Technically it's thought that the move above the minor consolidation from 6/11 represented a very positive move. This should put this sector in position to begin a larger rally, just at a time when Treasury yields look to be able to bottom out technically. The area between $27.70 and 28.10 looks very important and i expect this area to be challenged in July. Movement over 28.07, the daily close from 5/3, would drive XLF up to at least 29.07, the highs from last September, very quickly, but likely result in a more broad-based rally in this entire group. For now, it looks right to position long, looking to buy dips and also add to longs on signs of a breakout.


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Equal-weighted Financials vs the SPX shows a definite short-term breakout last week, given the rally above the recent downtrend (in Equal-weighted Financials ETF (RYF) vs the SPX.) This bodes well for outperformance in this group in the near-term. The daily chart in recent months shows two well defined lows followed by a higher low and then last week's breakout to turn back up towards the highs. This is a bullish development that suggests a rally back to former highs is possible as the pattern grows more constructive. Overall, this chart suggests Financials should start to outperform, and with a bit more progress, could be on the verge of a much larger move higher. For now, 4-6 week outperformance looks likely.


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Equal-weighted Financials relative to the broader XLF shows progress since December, but overall still insufficient progress to expect broad-based strength out of this sector just yet. The last week's progress in KRE and XLF was not really matched by the equal-weighted space which shows this ratio having declined in the last couple weeks. Thus, for now, this remains some of the larger companies making up XLF that have performed better than the Equal-weighted group. When this changes, this would be an even better sign of Financials beginning to show more strength.


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Regional banks have started to outperform the broader KBE, the bank ETF comprised of both money center banks, regional banks, and brokers. The daily chart of KRE to KBE shows a breakout of the intermediate-term downtrend from last Summer. This looks to be a significant development and warrants overweighting KRE, expecting Regional banks to show a bit more strength in the weeks and months to come.


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European Financials have also begun to show some signs of life lately,with the Ishares MSCI European Financials ETF, or EUFN, rising up to test the downtrend from April. Thus far this group has lagged US Financials badly i the last couple years as part of a larger amount of relative deterioration which has been ongoing for the last decade. Until this group starts to show at least some minor signs of strengthening relative to US Financials, it should be right to sell into this groupk, and EUFN right at 18.15-.25 in the coming week. Breakouts above 18.25, however, would be constructive for absolute strength in this group, and should be watched carefully given that prices are up against this strong resistance level.


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Ally Financial (ALLY- $30.99) Bullish, with last weeks breakout of the two month consolidation lifting this to right under last year's all-time high peak. Volume has expanded on this move, with 3 of the last 4 trading days showing totals greater than 5 million shares, which is the highest seen since mid-May. While the area at $31-31.65 could contain gains in the short run, the breakout in Financials likely helps this extend back to new all-time highs. Movement over 31.65 would represent a chance to add to longs, with targets up near $35. Overall, this is a bullish chart structure and momentum is not overbought given its consolidation. Thus, longs are favored, using any weakness as a chance to buy.


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Federated Investors (FII- $32.50) Bullish, with gains over early June's $32.84 leading to a retest of all-time highs made last year of $36.76.Similar to other stocks within this space, FII has formed a bullish continuation triangle pattern from late April that now looks to be in the process of giving way to further gains. Last Friday's minor breakout pulled back a bit into the close, yet on a weekly basis, FII still made the highest weekly close since mid-April. Additional gains are likely up to test last year's highs as momentum is not too extended on either a daily or weekly basis, with the consolidation since April helping to relieve any temporary extended state. Overall, FII is attractive here technically and should be considered here or on any minor weakness. Only a pullback under $31.15 would change its technical picture.


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PNC Financial Services (PNC- $137.28) Bullish with April's breakout of the 11 month downtrend likely paving the way for further gains in the weeks and months to come. Over the last month, PNC has consolidated its initial breakout but last Friday's push to 137.28 represented the highest weekly close since October 2018. Volume came in at 3.1 million on the day, the biggest volume day since early April. Thus, this move is seen as one to be followed which should lead prices up to $142.60 and then to test last Augusts highs just above $147. Former all-time high peaks lie near $163.58, and are considered a strong area of resistance, should this level be retested. For now, this stock looks very attractive to own, and one should give this serious consideration at current levels and on any minor pullback for the start of additional gains over the next couple months. Longs have important support near $126, which cannot be breached without postponing the advance.


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United Community Banks Inc/GA (UCBI- $28.56) Bullish- Friday's breakout of the symmetrical triangle started in February is very encouraging for further gains and should lead this to test and exceed February highs at $29.79. The six month decline starting last June caused some real damage in UCBI, with losses of nearly 40%, but this has been steadily climbing since December and now looks to be ready to start the next leg higher. Given the four month consolidation from February, last week's breakout of resistance should help to jump-start this stock higher with targets back in the low to mid- $30's. Last June's highs were at $34.18, so this will be the logical first target when $29.79 is exceeded. Overall, it will pay to be bullish here, looking at buying dips , with only a weekly close under $26.81 postponing this advance.


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T Rowe Price Group (TROW- $109.71) Bullish with expectations of an upcoming breakout of April highs that should lead back to last Summer's peak at $127.41. Looking at this stock's weekly chart we see TROW has recouped about 60% of what it lost since 2018 but remains still nearly 14% under all-time highs made around this time last year. The recent mild pullback from late April proved to be just five weeks in length before this pushed back in a series of higher highs and higher lows since early June. This has formed a nice 2 month base which is now being retested again. It's thought that a breakout of mid-June $110.50 should be imminent. Long positions are favored, technically, looking to add for a push higher as this continues up over the next 6-8 weeks. Momentum is not overbought on weekly charts and structurally this continues to improve. Only on a move back down under $105.56 would this rally be postponed.

Short-term Resistance for Indices possible into end of Quarter before further gains- Newton Weekly Technical Perspective 06/24/19

June 24, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2919, 2911-2, 2874, 2845-6

Resistance: 2963-4, 2971-2, 2985-8



Summary: Stocks remain in bullish short-term uptrends as part of intermediate-term uptrends but could be likely to stall out near former highs temporarily before additional strength happens into July. After 14 trading days from the bottom made on June 3, S&P has risen over 200 points, or 7.5%, at the rate of nearly +0.50% per trading day. Daily and weekly momentum are nearing overbought levels while intra-day momentum gauges are stretched and most certainly overbought. SPX was the lone US index to log a new all-time high last week, while DJIA, NASDAQ Composite fell short and are trading below highs made in April. Most of Europe shares this near-term challenge and has not yet risen back above April highs. Broader based gauges like the MXWO also seems to be near critical levels, and while over April highs, remains below those from last Fall. Overall, it's thought that US and European indices should push higher in July into August before any meaningful peak. However, at current levels, heading into this week's G-20 meeting and the upcoming OPEC meeting in early July, it looks right to hold off on initiating new longs here, as many sectors and indices are up against prior highs which might cause some temporary consolidation this week. The time of 6/24-6 is of key importance this month, as it's related to both the December 2018 lows and the September 2018 highs, so it's thought that if any consolidation is possible, it should start early in the week and likely conclude by end of week before a rally ahead of the July 4th holiday. Outside of Stocks, bonds furthered gains but look very close to reversing course and could do so as early as this week where yields bottom out at 1.90-5% before turning higher for 4-6 weeks. The Dollar meanwhile, has broken down sharply and moved quickly to its own key level of intermediate-term support. This bodes well for those looking for shorting opportunities in currencies like EURUSD or GBPUSD, and both could turn down into the month of July. Moreover, Emerging markets likely also might experience some temporary headwinds after their outperformance these past couple weeks. While near-term trends have been bullish for Crude, Gold and other commodities along with the EM space, including china,, these are all facing headwinds in the short run, and could consolidate recent gains. Bottom line, the trend in Stocks bonds , gold and oil might stall out temporarily this week , but it's thought that Treasuries stand the greatest chance of a larger trend reversal based on concepts like oversold conditions, momentum divergence and sentiment. We'll explain the thought process here and show some charts for illustration purposes below.







Important Developments of this past week (Shown in Bullet form)



US and European indices all pushed higher above near-term resistance and the breakout on Tuesday allowed Stocks to surge up to April highs, with SPX having finished briefly above to new all-time high territory



Breadth was constructive on last week's rally, and momentum remains bullish. Yet many indices and sectors now lie right at April highs which might cause some stalling out early in the week



Treasury yields remain negative but are now primed to reverse course, which should occur sometime in the next week. Any decline early in the week in US 10-year Yields down to 1.90-1.95% would be a very good risk/reward area to take profits and consider betting the other way for a meaningful bounce in Yields in July. This looks like an attractive technical risk/reward heading into July.



US Dollar gains reversed down sharply post FOMC meeting and trended down severely to right near key intermediate-term support. While the intermediate-term trend for USD remains neutral since May 2018, the short-term trend is bearish for USD but should hit support this coming week and turn back higher for a bounce into July.



Emerging markets were up sharply given USD weakness, and China, Taiwan, Korea all showed very good gains this last week. This looks to continue this final week, but many are getting stretched and near resistance to sell into by early July and likely will pullback if the US Dollar stabilizes.



Technology roared back to life with a big move higher out of the Semiconductor and Software groups as Trump announced that he would be meeting with President XI of China this coming week. This sector was higher by 3.32% and is thought to be heavily influenced by the prospects of a trade deal. Additional gains in Tech likely into August.



Healthcare extended its recent breakout and is now the 2nd best sector for the last month, higher by 5.36%. So despite this sector still being the worst performing group of the year, higher by just +8.36%, it's showing some definite signs of strengthening meaningfully into this seasonally bullish time for the group.



Crude oil spiked up sharply given the Iranian strike on the US Drone last week, and the move above $55 helped to reignite Crude's bounce as it broke out above the minor downtrend in place. It's likely that Crude fails to get above 60 before stalling and turning back lower, but for this coming week, additional gains look possible into the OPEC meeting in early July.



Precious metals rose sharply with Gold having finally managed to exceed its long-term consolidation highs at 1365 that have been in place since 2013. Momentum grew very overbought after Gold's rise of 100 points in the last month, but this is thought to be a significant intermediate-term bullish development for Gold and any pullbacks into July should provide attractive buying opportunities.



Small-caps and Mid-caps failed to strengthen vs the broader market this week, even on a push back to new highs for the SPX. Both extended losses relatively speaking. While a bounce in both looks likely in July, the extent of the dropoff in both groups is a concern for the months ahead.



Sentiment continued to improve over the prior week with the CBOE Put/call ratio for Equities dropping to 0.53 and AAII poll narrowing back to nearly even between bulls and bears





Key ETF High Conviction ideas heading into this week



Short SPY from a trading perspective at 294-296.30 for a move down to 290 or below that at 287. Above 296.30 its right to cover shorts and be long for move to 298

Short IYT now at 186-8 for a move back down to 180



Long US 10 Year Treasuries at 2.05 to 2.08, expecting move down to 1.95 which is an area to take profits and bet on yields reversing higher .



Long XLV (86.65-87.50) targeting 95-95.50

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Value Line Arithmetic Avg is nowhere near April highs, still meaningfully below along with last Fall's peaks. This is important given that this Average is a far more broad-based average than the SPX, and dispels the notion that markets are really breaking back out to new highs.






SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Early week Bearish with stops above 2964 on a close. Overall, trends remain bullish but just stretched and up against levels which could lead to a stallout this week, particularly on 6/24 which has time relationships to both last December's lows (180 calendar days) and to last September's highs (270 calendar days) Many indices and sectors have not shown the same degree of strength as SPX, and SPX showed a few signs of stalling and reversing late Friday which could lead to some early week carryover, to the downside. After a 200 point rally in 14 trading days, or nearly 7%, this looks to be a spot where prices can stall. However, getting back over last Friday's highs on a close would result in even further gains to 2980 and one should hold off on trying to sell if prices close above last Friday's highs.





Intermediate-term (3-5 months)- Bullish- Move higher to 3040-70 likely into September before any meaningful peak. May's pullback, has not been sufficient to turn intermediate-term trends negative. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far and SPX remains just 6.5% off all-time highs. The one important Technical negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. Weekly momentum, has just joined Monthly in being negative, so at present, we have Daily, weekly and monthly MACD all negative. However, for now, price weakness has proven fairly benign, and we'll need to see some evidence of more serious breadth deterioration and more bullishness to have concern on an intermediate-term basis. Advance/Decline for Equities did peak out with indices in early May, while the Summation index has been negative since February. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020. However, the time period from mid-September into November could set the tone for 2020. Stay tuned.






10 Charts of Equity indices, commodities, currencies and Treasury yields

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SPX- Near-term prices have reached former peaks from April and upside might prove limited after 200 S&P points over the last 14 trading days. Counter-trend exhaustion remains premature however, and sentiment remains largely still subdued. Thus, any pullback this week likely should prove to be an attractive buying opportunity for a move up to 3040-70 which has a number of technically derived targets. Overall a brief move to new highs isn't necessarily all that bullish in this case only because it's happened before in this structure where prices attempted to break former highs in January and also in September of last year before failing. While momentum and breadth are still in relatively good shape, if one wants to pick spots to sell into this for a 3-5 day basis, this doesn't look bad in the near-term.


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US 10-Year Yields are close to turning back higher and this could come about over the next 2 weeks. While trends are bearish and one can't rule out a move to 1.95%, both price and time targets look to be near. Momentum is oversold, while Demark exhaustion is present on both daily and weekly charts. Overall, it looks right to use any early week Treasury strength to take profits and start to bet the other way, for an above-average move higher in yields into July and August.


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Dollar decline looks to be nearing its 1year trendline support, but this might offer a chance to sell into EURUSD, GBPUSD, while betting against Emerging markets and Commodities. At present, this still looks to have another few days of moving lower this coming week, but once this reaches trendline support, it will be right to consider a bounce.


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Gold looks to have finally made an intermediate-term breakout in USD terms, after last week climbed above 1370, exceeding peaks going back since 2013. This is a very bullish intermediate-term move, though near-term could stall given the extent of the advance in the last month. Momentum has gotten very stretched, and it's likely that 1425 could hold the first move up and then some brief consolidation before the advance continues. Bottom line, Gold looks quite positive technically on a long-term basis for the first time in over five years. It's right to own in small size and use any pullback to add to positions.


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Copper made its first meaningful breakout of the downtrend from earlier this year on a rise back up above 270. This is a positive development and suggests a Double bottom to the lows from early 2019 is at work. Movement over 275 should drive Copper up to 285 and then 300. Only on a move back under 260 would this rally be postponed.


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Emerging markets have made a sharp rebound in recent weeks given the decline in the US Dollar. Ishares MSCI Emerging Markets ETF managed to climb back over $42.29, the 50% retracement level of the April decline that had held on the first rally. Targets at this point lie near $43.50-$44 but should be used to pare down longs, as the Dollar is nearing very important short-term support. Given that this rise, directly coincided with Dollar weakness, any signs of Dollar strength would now lead this back lower. For this week, gains look likely and important to highlight the snapback in the EM space.


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Crude oil looks to have a bit more strength into the OPEC meeting but should be considered a "sale" if/when this can get back to 60, the area near former lows. Crude experienced its largest move of the year last week when it was learned that Iran had shot down a US Drone, escalating tensions and providing a meaningful rebound in WTI. Prices getting over $55 was thought to be bullish and stopped out shorts. Gains seem likely up to 58.50 this week, the 50% retracement of the prior decline. Additional targets are found near $60 whic marked the initial lows early in May and should represent strong resistance. Overall, unless prices can get over 60, this is thought to be a short-term bounce only and should present selling opportunities into the OPEC meeting in early July.


PutCall Ratio on equities has gotten near extreme levels on daily charts that argue for a possible stalling out to the Equity rally, as this has gotten compressed enough to show calls being bought over puts at a near 2/1 ratio. Often this can prove to be temporarily bearish for stocks as everyone is betting that stocks can rise via call options which ordinarily tends to be poorly timed at the extremes.


AAII, as one measure of individual investor sentiment, has gotten less bearish over the past two weeks, and now shows a near EVEN ratio between bulls and bears, a spread of just -2.6 as of last Thursday. This is important to show, because despite the gains in stocks over the past few weeks, investors still look to be guarded, given the lack of a trade deal and signs of global economic slowing. These are a larger bullish sign for the stock market for now, but as this starts to climb to the ohter side of the spectrum on further market gains in the next couple months, it will be important to monitor.


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Russell 2000 vs SPX continues to fall to new lows, despite the broader market rally. Neither Small caps, nor Mid-caps have participated of late, and this seems to have the potential to be a larger problem for the market into the Fall if not erased. Counter-trend buy signals via Demark indicators have just arrived on daily ratio charts of RTY/SPX, so it's important to monitor whether this can bounce into July, or remains near lows.

Pivotal time ahead of FOMC with OPEC meeting on deck

June 17, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2874, 2841-2, 2820

Resistance: 2910-1, 2930-2, 2945-6



Summary: Near-term trends began their much needed consolidation last week after running up nearly 6% in the prior 6 trading days. S&P still lies 140 points higher than levels hit less than two weeks ago back on June 3, and there's no saying that this consolidation has completely run its course. The past few days managed little to no real progress for Bulls nor bears, and by Friday's close, S&P was less than a half point away from were prices had closed Monday. This coming week brings about the much anticipated June FOMC meeting, and while a lowering of Rates has not been priced in by the market for Tuesday, such a move IS expected by July, and failure to do so would be a surprise to markets (Based on current positioning). Bottom line, with regards to Equity price direction this week, trends have not turned down sufficiently to warrant a bearish stance, but any daily close under 2874 certainly would argue for at least 3-5 days of weakness before a low, and the time period following this week's Fed meeting certainly stands out as having a higher than average probability. On the upside, above 2910 would bring about a quick test of 2930-45 before stalling. Outside of Equities, the recent volatility in both Treasury yields and the US Dollar gives more conviction about price action to start this coming week. Treasury yields have been trending lower, and still look likely to trend lower in the next 1-2 weeks before bottoming, with 2.00% a definite possibility, along with 1.95%. However, yield reversals look likely in the month of June. Meanwhile, the US Dollar has begun to turn back higher after the initial falloff into early June. Additional near-term strength here is likely this week. Overall, it's tough to have a lot of conviction about the near-term, as a few bearish developments have surfaced (which will be discussed below) while the broader trend remains in good shape and is likely to result in a push back to new highs in July and early August before a fall peak. Any selloff should provide opportunities for Dip buyers for a better risk/reward than at current levels, and it's thought that the next 4-6 weeks is certainly still bullish.



Important Developments of this past week (Shown in Bullet form)



US and European indices stalled out, but yet no meaningful higher nor lower prices and it's tough to have a lot of conviction heading into this week. One should "follow" price on a move above 2910 or below 2874



Sideways consolidation has allowed intra-day overbought conditions to ease, and the Percentage of stocks over 10-day moving average (m.a.) has gone from 90 % back on 6/10 to now at 78% and dropping. This is thought to be constructive.



Treasury yields have continued to drop, and still not at targets to Sell Treasuries, but the next 1-2 weeks should bring about lows in yield and it would be right to take profits and sell into a further Yield decline, as the upcoming FOMC meeting should coincide with a low in yields which could lead yields back higher in July. For the next 1-2 weeks, Yield trends are negative.



US Dollar turned up sharply late last week, and additional Dollar gains look likely in the short run, which could prove to be near-term negative for Emerging markets and commodities.



Emerging markets turned down last week given the Dollar bounce, and this still looks to be an area that should weaken into late June with a bounce in USD.



Defensive sectors rebounded with Utilities, Staples and Real Estate all in the top tier of sector performance and outperforming Financials, Technology and Industrials.



Technology proved to be a laggard last week, with negative performance of -0.20% for the week vs a mild gain for the S&P. This weakness looks to persist into 6/20-5 before bouncing and could put pressure on markets given its size.



Crude oil failed to turn up sufficiently to think the worst is over, but is trying to stabilize ahead of the OPEC meeting later this month. The news regarding the Tanker hit did provide a minor bounce, but as charts will show below, not enough to negate the ongoing downtrend.



Precious metals strengthened further last week, with Gold having pressed up to very important resistance at 1360-5 while Silver also gained ground. When viewed in multi-currency form (and not just US Dollar), Gold did manage to achieve a multi-year breakout last week. Thus, any near-term weakness over the next 2-3 weeks given Dollar gains likely do translate into a chance to buy Gold at better levels. Above 1365 would be a very positive sign on intermediate-term strength to come.



Small-caps and Mid-caps have broken down in the last few weeks despite an above-average Equity bounce this last week. This is a bit discouraging, and definitely something to keep an eye on. As relayed last week, Mid-caps vs SPX in relative terms has hit the lowest levels since 2010.



Sentiment has improved slightly in the last week, both with Equity Put/call easing to 0.63 from prior 0.77 and with AAII polls narrowing the negative spread between Bears to bulls to just 7 points above.  







Key ETF High Conviction ideas heading into this week



Short SPY from a trading perspective under 287 for a move down to 284. And longs recommended over 291.4 for a move up to 294

Short IYT now at 185-7 for a move back down under 180



Long US 10 Year Treasuries this coming week, with expectations of TNX getting down under 2.06 to a maximum of 2.00% which should be used to sell



Long XLV (86.65-87.50) for a move to 90 initially- Above 90 should bring 97



Short EEM (40.71-41.50) for a move back to 39

Short FXI (40.49) for a move back lower to 38-38.50

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S&P futures hourly charts show the ongoing Triangle pattern that has been created by early week highs last week and minor consolidation throughout the week, with one higher low and one lower high since last week's minor peak. As of Sunday evening, highs were exceeded with the advance above Friday's highs which bodes well for additional upside into FOMC and after. 2884 is area of support which cannot be broken in this scenario.









SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Early week Bullish with stops at 2884- Minor consolidation last week within ongoing uptrend, but trends have not turned lower and still looks right to favor additional strength. If weakness is going to happen in June, it's likely to take place over the next 2-3 weeks, with a key timeframe between 6/18-6/25 with 6/24-625 being important. If prices trend higher into this time period, it could very well end up being a minor high which leads to a pullback into end of Quarter. At present, trends have not turned negative but the consolidation has helped momentum become less overdone on intra-day timeframes. One should look to follow either strength or weakness this coming week, with the early week bias being bullish.





Intermediate-term (3-5 months)- Bullish- May's pullback, has not been sufficient to turn intermediate-term trends negative. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far and SPX remains just 6.5% off all-time highs. The one important Technical negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. Weekly momentum, has just joined Monthly in being negative, so at present, we have Daily, weekly and monthly MACD all negative. However, for now, price weakness has proven fairly benign, and we'll need to see some evidence of more serious breadth deterioration and more bullishness to have concern on an intermediate-term basis. Advance/Decline for Equities did peak out with indices in early May, while the Summation index has been negative since February. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020. However, the time period from mid-September into November could set the tone for 2020. Stay tuned.









10 Charts of Equity indices, commodities, currencies and Treasury yields

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SPX- Near-term prices have stalled out, but as daily charts show, we've seen no meaningful deterioration. Momentum is positively sloped and not overbought, and prices have gone nowhere in the last week. Any decline in the next 1-2 weeks should be buyable for a push back to new highs. For now, it looks right to follow the price action. Above 2910 can lead back to former highs, while under last week's lows should lead to a max move to near 2845 which should be buyable. (Late Sunday night positive follow-through seems to be a bullish factor for Monday, exceeding the minor triangle consolidation. Longs still recommended, though with trading stops at 2884.



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US 10-Year Yields remain bearish and pullbacks to test and breach former lows likely before an intermediate-term bottom. Last week saw yields turn down early in the week and not much relief as both Treasuries and Stocks both gained ground. As said last week, both daily and weekly charts are on the verge of the first confluence of downside exhaustion in over a year. This could allow for some stabilization and a trend reversal back higher in yields, though it will take another 2 weeks for this to materialize. The area at 2.00-2.06% looks important as this is not only a 61.8% Fibonacci retracement, but also lies right near March lows. Bottom line, further near-term weakness in Treasury yields likely into FOMC and the week thereafter. Yet Yields should be very close to an area which would allow for a counter-trend rally in Yields


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Dollar breakout of the trend from late May is encouraging for additional gains in the next 1-2 weeks before the next big test. Last Friday's breakout of the downtrend is a good sign technically that a bounce is underway, and it's expected that Emerging markets likely lag in the weeks ahead on dollar gains. If USD stalls out before taking out prior highs and turns back down, this would be a potential sign that Commodities and Emerging markets could begin to turn higher. At present, it's expected that the Dollar strengthens further into end of month before any peak.


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Gold looks to have made a very meaningful breakout last week when viewing this move in multi-currency form, as opposed to just US Dollars. When utilizng Elliott-waves Stable currency benchmark index which is composed of four currencies and not just US Dollars, we see that Gold has made a stronger move than what has been seen on regular $-dominated weekly charts which still require a move above 1360. This is bullish for Gold and on any backing off given the Dollar strength near-term, this should provide an excellent buying opportunity for a further push higher. It's expected that Gold should eventually turn back higher and take out 1360 which should turn the intermediate-term charts bullish.


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China turning back lower when viewing FXI on a daily basis. The decline from late last week looks to have further to go, and could test and break recent lows before any sort of meaningful bottom is in place. Technically the act of violating 6/12 lows on a close is a negative as price has reentered the base that was broken last week. This can allow for weakness now back down to new low territory before any low is at hand. Downside targets are found near $38.50 or even $38 but should prove to be buyable.



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China vs US- Relatively speaking, China v SPX in ratio form (GXC vs SPY) remains quite weak near-term, and as weekly charts show above, this relative relationship broke down under the lows from 2018 last week.

Counter-trend buys however are now at hand and could offer some stability into the end of June for a big counter-trend bounce. At present, however, it looks right to avoid China until end of month as nothing is in place yet, and this ratio chart has continued to drop. On a weekly basis, the technicals have shown some improvement over the last few years starting with the strength into 2017 and early this year, which managed to exceed the entire downtrend from 2010/2011. However, we'll need to see some signs of this starting to hold and turn higher in July. For now, it remains a near-term laggard.


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Crude oil looks to weaken further given last week's deterioration and might trend lower into OPEC meeting before finding a low and turning higher. Trends and momentum are lower, and not all that oversold after the recent churning near the lows which has had the effect of taking momentum back out of oversold territory. Overall, it looks early to be long and movement down to test and undercut $50.72 looks likely which could take Crude to 48-49 area which should be good support to buy. Counter-trend exhaustion remains early for Crude but interestingly enough looks to line up right near the OPEC meeting. Thus, it's thought that the path of least resistance remains down, but should be close to bottoming and turning back higher. The Tanker strikes looked to have resulted in insufficient bounce in Crude to change the structure to bullish.



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Technology's minor rally in June now looks to be stalling and rolling over again. Technology's underperformance last week was one reason to have concern given its 21% weighting in the SPX. While SPX held up in resilient fashion, it was the action of other sectors like Discretionary and Industrials along with Healthcare that successfully held the market up. Last week's performance was -0.20% the third worst performing sector of the week. Now relative charts of the Equal-weighted Technology ETF vs broader market has begun to turn back lower, as the daily chart shows above. This could put further near-term pressure on markets and looks to be weak into late June before a bounce.


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Equal-weighted Consumer Discretionary ETF vs Consumer Staples ETF looks to be stabilizing and turning back higher after persistent weakness in the last two months. This peaked back in April but the pullback in relative form has held where it needed to and now turned back higher last week. This chart looks to be bottoming and could allow for outperformance in Discretionary vs Staples in the upcoming 1-2 months. Overall this would support the notion that stocks likely can rally further without any larger peak, and any near-term weakness likely is buyable.


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Financials are holding up much better than expected given yields having dropped to the lowest closing levels since mid-2017. This sector started to turn up in March and now has been churning right near the longer-term downtrend line when eyeing XLF v SPX. While this looked to have been potentially broken a few weeks ago on daily charts, it was never confirmed on a weekly basis, and more needs to happen to think this group can have a meaningful move. Yet, it's thought that the path of least resistance, is in fact higher with Financials having held up very well in the face of yields being as low as they are and overall economic uncertainty.

Equity trend near-term positive, but likely undergoes consolidation this week

June 10, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2734-6, 2722, 2712, 2650

Resistance: 2775-7, 2800-2, 2836, 2892-3



Summary: Near-term trends turned sharply bullish early last week with the move back up OVER prior lows from May 13th (S&P 2800), along with successfully eclipsing the minor downtrend from May. (2813-5) This helped US equity indices log the best 5 days of performance for the year. At present, prices are nearing intra-day overbought levels, and it's notable that the last few days have pushed higher on sub-par breadth and momentum. While Technology made a good comeback, we also saw meaningful outperformance in Healthcare which was impressive after several sideways months. Overall, indices could stand to consolidate some of these gains given the extent of the move- Make no mistake, the short-term trend IS in fact bullish. Yet, with overnight Futures gains showing S&P higher by nearly 150 points since last Monday's lows, (DJIA up more than 1000), the risk/reward is growing poor in the short run, and I expecting at least a minor stalling out in this trend this week, which could materialize between Monday and Wednesday, pulling back, but providing opportunities for Dip buyers for a better risk/reward than at current levels.



Important Developments of this past week (Shown in Bullet form)



SPX, NASDAQ, DJIA are nearing their first signs of time-based resistance after last week's rally after signaling Intra-day Demark based sells on 120, 180 and 240 minute charts for the first time since last Monday's 6/3 lows



Indices are only overbought on intra-day timeframes while none of the major indices have gotten to true overbought levels on Daily charts. Even after 1000 point gains in DJIA and 150 points in S&P Futures, this rise is seen as constructive near-term, but just overdone, and requiring consolidation.



Gains last week go directly against what the popular narrative is that Tariffs should be "bearish" for stocks in the short run. While many attribute Equity decline in the month of May to a ramping up in trade tension, very little explanation is available to explain last week's rally. Many technical indicators had suggested indices were getting close to rallying, and sentiment and trend remain more important factors for those that care on near-term direction, than News.



Bearish sentiment remains a constructive factor for Equities, and even after a huge 4.4% gain for Equity indices, sentiment is largely still subdued, with many expressing caution given the lack of any meaningful Trade deal and ongoing signs of global economy cooling. Ahead of last week's gains, we saw the Equity put/call ratio hit the highest levels of the year and last Thursday's AAII sentiment poll still shows a 20% spread of Bears above Bulls. Thus, pullbacks likely find a floor on any decline into 6/20-4 and would be buyable for a move back to new high territory



Treasury yields continue to be a concern as yields have not followed or led Equities higher, as might have been expected given this recent positive correlation returning to the market in May between yields and stocks. Numerous technical signs point to an upcoming LOW in yields within the next 3 weeks, so it looks right to sell Treasuries into this advance, along with TLT and consider TBT, as 2% likely serves as a good floor for yields.



Emerging markets have lagged the move in Developed markets over this past week, and this still looks likely in the weeks ahead. Movement back over May highs in the ratio of Developed to Emerging could lead to a much bigger period of underperformance for the EM space.



Defensive sectors largely underperformed last week, though Consumer Staples did manage to outperform Discretionary by over 100 bps on the week, even on a +4% market rally. Technology meanwhile rallied sharply and has regained its spot above all other S&P GICS Level 1 sectors for YTD Performance.



Healthcare showed a meaningful technical breakout that bodes well for this sector to continue to outperform. This is a positive given that Healthcare is the #2 group in representation within SPX, and this sector looks likely to continue higher as it nears its seasonally bullish time in late June and July.



Crude oil managed to stabilize and begin a minor rally within its downtrend this past week. For any real hope of a larger rally ahead of OPEC meeting, Crude will need to get up above $55.50



Precious metals have rebounded sharply over the last few weeks, despite a lack of the broader commodity space lifting. This rally looks to be nearing meaningful resistance this week and it's still difficult to have a bullish intermediate-term bias in the Precious Metals (Though Gold's pattern is growing far more constructive and over 1365 would be very bullish and a chance to buy for intermediate-term gains.



2's/10s Curve has steepened pretty dramatically in recent weeks, though there are signs that 2-year yields are very close to bottoming out in the short run, and should not get below 1.70%. Thus, a rebound in 2 year yields into July should cause a compression in the 2/10 curve yet again.



Small-caps and Mid-caps have broken down in the last few weeks despite an above-average Equity bounce this last week. This is a bit discouraging, and definitely something to keep an eye on. As relayed last week, Mid-caps vs SPX in relative terms has hit the lowest levels since 2010.





Key ETF High Conviction ideas heading into this week



Short SPY from a trading perspective above 288.85 with stops at 292 and targets at 282.5

Short IYT now at 185-7 for a move back down under 180



Long US 10 Year Treasuries this coming week, with expectations of TNX getting down under 2.06 to a maximum of 2.00% which should be used to sell



Long VNQ (87 or lower) for a move up to 90 and will reverse to short by 6/20

Long XLV (86.65-87.50) for a move to 90 initially- Above 90 should bring 97



Short EEM (40.71-41.50) for a move back to 39

Short XLC at 48-48.50 for a move back lower to 45.50-46

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S&P futures have jumped up to near 2890 into Sunday evening as Trump's Mexico tariff idea has been postponed indefinitely. For the first time since 6/3, we see counter-trend signs of exhaustion on 240 minute charts, while momentum has gotten back to overbought levels. Prices have jumped nearly 150 points since last Monday, and while movement back above 2815 resulted in acceleration, this area is thought to be difficult for S&P to make too much more progress. Pullbacks this week look likely technically speaking, but yet drawdowns should be buyable for gains into July.







SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Expecting a stallout early week and pullback to consolidate gains before movement over 2900 can occur. While the near-term trend is certainly still bullish, it's thought to have moved too far too quickly, and could face weakness over the next couple days or into the next week potentially into end of quarter before gains into July get underway. One of the concerns revolves around 10-year yields still being downward sloping and showing no real evidence of turning higher. Meanwhile the deterioration in both Small and Mid-caps remains a concern. Thus, while momentum did turn higher on daily charts, on the breakout early last week, both weekly and monthly momentum remain negative.




Intermediate-term (3-5 months)- Bullish- May's pullback, has not been sufficient to turn intermediate-term trends negative. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far and SPX remains just 6.5% off all-time highs. The one important Technical negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. Weekly momentum, has just joined Monthly in being negative, so at present, we have Daily, weekly and monthly MACD all negative. However, for now, price weakness has proven fairly benign, and we'll need to see some evidence of more serious breadth deterioration and more bullishness to have concern on an intermediate-term basis. Advance/Decline for Equities did peak out with indices in early May, while the Summation index has been negative since February. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020. However, the time period from mid-September into November could set the tone for 2020. Stay tuned.







10 Charts of Equity indices, commodities, currencies and Treasury yields

SPX- Gains likely to stall out this week. Near-term gains have recouped more than 62% of the prior drawdown, yet have moved higher literally in a straight line, with little to no real consolidation. This week should put an end to this, given intra-day overbought conditions and some signs of exhaustion. Cycle-wise the time at 6/10-11 has some importance as a timeframe which could produce a reversal of trend. So, while the uptrend looks very much intact, it's unlikely to move much higher without some degree of consolidation. Groups like Healthcare and Utilities and REITS can be favored this week, while looking to fade movement in Communication.





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US 10-Year Yields still look to push lower after last weeks' rebound attempt largely failed. Daily and weekly charts, however, look to be on the verge of the first confluence of downside exhaustion in over a year. This could allow for some stabilization and a trend reversal back higher in yields, though it will take another 2-3 weeks for this to materialize. The area at 2.00-2.06% looks important as this is not only a 61.8% Fibonacci retracement, but also lies right near March lows. Bottom line, it appears that this week and next can allow for a bit more yield weakness, yet should be very close to an area which would allow for a counter-trend rally in Yields





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Financials gave a minor shakeout in trying to exceed the entire downtrend vs SPX in the last week. (Chart above illustrates the ratio between XLF and SPX) However, if yields bottom on schedule in the next 2-3 weeks, this group should begin to turn back up sharply into July. It's notable that the pattern overall has been upward sloping over the last few months and hugging this area near the downtrend that was thought to give way to a potential push higher. While last week's effort largely looks to have failed, one should look to buy dips in Financials into June expiration, and it's thought to offer a good risk/reward consider averaging into longs within 2 weeks time.


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US Dollar showed one of its largest breakdowns in the last few monthslast week, severing uptrend line support and turning lower. This coincided with Precious metals doing well. Yet, most of commodities are still downward sloping, and still have not really bottomed. It's thought that the Dollar likely can continue lower this week, but should be closer to a low, and might snapback into end of month before any further weakness. Heading into this week, another 2-3 days of weakness are possible, but USD should be near a counter-trend rally.






Gold is nearing short-term areas of importance near early year highs, and the area at 1350-60 should offer an initial area to sell into, for trading purposes. While Gold's pattern has certainly grown more constructive, the metal will require a move over 1365 to be bullish on an intermediate-term perspective. At present, counter-trend sells per Demark in the form of TD Sell Setups (9 consecutive trading days where the close is greater than the close from four days prior) It's also thought that the decline in the US Dollar is nearing first support and might bounce in the weeks ahead. Thus, Gold might underperform into late June/July before a larger rally in August-October. For now, it's early to be too bullish on Gold, but worth watching carefully with plans to buy for intermediate-term purposes over 1365.







Healthcare looks to be one of the better risk/rewards to consider buying into, technically, given its breakout of the recent consolidation pattern that has held prices intact since early March. This group notoriously shows decent performance in June and July, so gains should be followed in this case and particularly in groups like the Medical Devices and Pharmaceutical stocks. Other groups like Biotech and Healthcare Services should gradually play catchup, but for now, are lagging the other groups.


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REITS have been gaining ground given the Yield decline, but look to have just 2-3 weeks more of outperformance before hitting very important resistance, and investors might consider selling into these gains into mid-to-late June. Treasury yields are thought to be close to bottoming, so this should present an attractive time to consider selling out of some of these outperforming Yield sensitive groups, and overweighting groups like Financials for a larger snapback rally. VNQ has technical targets between $90-91 that should offer good opportunities for profit-taking.


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Technology's stabilization and minor breakout back on 5/24 was important in showing that this sector was finally starting to bottom out after a huge period of underperformance in May. While many commented on FANG stocks declining into the first couple days of May, momentum had begun to improve and subsequently turned up sharply as prices began to rally last week. Technology turned in the 2nd best performance of any of the major sectors and has cemented its spot yet again as the #1 performing group of the year. While this coming week could witness some backing and filling, this should still represent a chance to buy this group for a larger rally in July into August.








The Communications Sector SPDR ETF, (XLC) has now reached levels that likely represent good areas for profit-taking into this coming week. This sector lagged all other 10 sectors last week with gains of just +0.93%, vs S&P gains of +4.41%. This current level at $47.57 represents strong trendline resistance and is thought to be a level to consider selling into. Pullbacks over the next 2 weeks would offer a better area to buy, than at current levels.









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AAII sentiment contracted substantially last week, based largely on price action which occurred prior to last week's rally. Bears outnumbered Bulls by more than 20 bps, which is close to the levels last seen at December 2018 lows. While this week's numbers are sure to come in a bit better and show contraction in this ratio, it should be noted that Sentiment is still largely subdued and not all that bullish. Therefore any minor pullback over the next couple weeks to consolidate last week's gains should prove to be an excellent buying opportunity for gains into July.

Bullish Trend reversal could arrive as early as this week

June 3, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2734-6, 2722, 2712, 2650

Resistance: 2775-7, 2800-2, 2836, 2892-3



Summary: Bottom line, Equity downtrends should likely reverse course and turn up for a bounce betwteen June 3-15 with a high likelihood of a sharp rebound that could carry prices higher into early September. The combination of oversold territory with excessively bearish sentiment are thought to be key factors here. Additionally, Crude oil along with Treasury yields, which both turned down sharply at the same time as Equities are now both approaching price and time based levels that should be important to watch for signs of lows in Equities. Overall, a bearish stance makes sense heading into the first week of June given Trend, and lack of Demark Exhaustion, but it's thought to be something that could reverse course this week. So i am on the lookout for a Reversal, and important to watch for evidence of early weakness Monday or Tuesday that reverses course. Particularly, any move back up above 2800 now the key area that was violated would be important and bullish.




Important Developments of this past week (Shown in Bullet form)

SPX, NASDAQ, DJIA and many European indices (SX5E) broke Mid-May lows, a technically bearish development that allowed for acceleration lower. Near-term trends remain bearish


Indices are getting close to near-term oversold levels. RSI at a 36 is roughly in line where it was in mid-May, while only 15% of stocks are now above their 10-day moving average. Close to oversold on a daily basis, but certainly not weekly or monthly


There is the start of some minor divergence in momentum building, as the Percentage of stocks above their 10-day ma is not as low as it was last Wednesday/Thursday, despite Friday being a big down day. Additionally, S&P is 60 points lower than May 13 close, but yet, momentum is not below those levels. So the start of divergence, which is a positive


Bearish sentiment is starting to reach levels which can be considered "bearish" The Equity Put/call ratio is now at the highest levels of the year (which would make sense) Daily sentiment index shows a reading of 12 (0-100 scale) (Normally single digit readings provide good entry points for Bulls) Additionally, AAII, the American Association of Individual investors shows 15% spread with Bears greater than Bulls, Yet still below levels hit back in mid-December

Treasury yields have broken down under support at March lows for US 10yr, and have pressed lower to just above key support at 2.06%, which would be a 50% retracement of the prior Yield rally from December lows.


Emerging markets have stabilized a bit in recent days, with minor Dollar weakness, though Dollar strength against Mexican Peso was important and positive for the Dollar and seems poised to rally further this coming week. So it's thought that intervention here is unlikely right away.


Defensive sectors underperformed last week, interestingly enough, with Staplesa nd Utilities finishing near the bottom of the pack. Meanwhile, Technology was the third best (less worse) performing sector, down -1.88% this past week. This indicates two things: The worst has likely been seen for Tech in the short run. And Markets are starting to turn more in favor towards Discretionary, and Financials

Crude oil's breakdown became more severe this past week, with Crude giving up nearly 61.8% of the former December-April rally. Lows in WTI look to occur this week based on a combination of near-term oversold conditoins and counter-trend exhaustion, right at key Fibonacci levels.

2's/10s Curve tried to rebound last week after 3 straight weeks of flattening, ad the 2yr yield fell below 2%. Overall, we've seen signs of 2/10 stabilizing since last Summer. While last Feb/March saw extreme flattening in the curve into September 2018, it has traded largely in range-bound consolidation since.

High YIeld has begun to widen out vs Investment grade bonds, and we've seen the ratio of LQD to JNK, as a ratio of Credit strength or weakness, start to show underperformance in High yield. This ratio has now exceeded the prior highs from last December 2018.


Mid-caps joined Small caps in breaking down to multi-month lows in relative terms and in the case of S&P 400 Mid-Cap to SPX ratio, it hit the lowest levels since 2010. Not encouraging on an intermediate-term basis,


Strangely enough, this recent selling has had little to no real effect on Growth, which remains at new highs vs Value. Ratios of S&P Growth to S&P Value broke out to new all-time high territory in mid-May and have not looked back. Growth should still be favored, and Value remains the laggard.



Key ETF High Conviction ideas heading into this week


Long SPY (274 down to 273.50) for a move up to 280 initially- Over 280 would warrant adding to longs

Long IYT (173-175) for a move up to 181-3

Long TBT..(29-29.50 entry) for a move up to 33

Long XLK (71.50-71.85) for a bounce to 74.50-75

Long VNQ (87 or lower) for a move up to 90

Long XLV (86.65-87.50) for a move to 90 initially- Above 90 should bring 97


Short EEM (40.71-41.50) for a move back to 39

Short FXI (40.37-41) for a move down to 38.50


Sell GBPUSD (1.2647-1.27) for a pullback to 1.25

Sell EURUSD (1.1179-1.12) for a pullback to 1.10.50-.75

Long USDMXN (19.75 down to 19.25) for a move up to 20.50-20.75

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SPX trend continues to look bearish near-term, and weekly charts show prices nearing the first important Fibonacci area of the prior Dec-April rally, near 2822 (38.2% ) Prices are 6.5% below the all-time high close from 4/30/19, having dropped in four consecutive weeks. Momentum is not oversold, though indicators like MACD have crossed back over to negative territory, with MACD crossing the signal line, which for the time being, is a negative. Overall, the area at 2722 up to 2735 is thought to have some importance for at least a temporary low this week. Under 2722 is not immediately expected, but would result in a pullback to test 2650, the 50% retracement of the prior rally. To have any conviction about a low at hand, prices need to get back up above 2800,which for now is very much premature.




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish for a bounce this week, which should come about when S&P gets to 2722-37 (a bit lower levels) sometime Monday or Tuesday. Momentum is nearly oversold based on a few different metrics, while fear is on the rise. Additionally, other assets which have correlated quite positively with Stocks in recent weeks look to be very close to meaningful support, that being both TNX and Crude. Overall, while trends are bearish, it's thought that SPX has a bit more pullback but does not break 2700 on this first go-around and should begin to turn higher. Movement back up over 2800 would signal the rally is on, and one would hold off on shorting/hedging, expecting a larger move.




Intermediate-term (3-5 months)- Bullish- May's pullback, has not been sufficient to turn intermediate-term trends negative. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far and SPX remains just 6.5% off all-time highs. The one important Technical negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. Weekly momentum, has just joined Monthly in being negative, so at present, we have Daily, weekly and monthly MACD all negative. However, for now, price weakness has proven fairly benign, and we'll need to see some evidence of more serious breadth deterioration and more bullishness to have concern on an intermediate-term basis. Advance/Decline for Equities did peak out with indices in early May, while the Summation index has been negative since February. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020. However, the time period from mid-September into November could set the tone for 2020. Stay tuned.




10 Charts of Equity indices, commodities, currencies and Treasury yields

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SPX- Near-term trend remains negative and accelerated last week after the break of 2800, representing mid-May lows and thought to be important structurally for SPX. However, there are some encouraging developments that suggest a bounce is not too far off and could come about this week. Momentum is just now nearing oversold levels, but has not yet gotten below Relative Strength Index (RSI) levels hit back on May 13, despite prices being 60 points lower. This is thought to be mildly positive for the prospects of an upcoming bounce, and the area at 2739 would represent an area where both of these "legs" of the pullback would be equal price-wise. (4/30 into 5/13 would equal 5/16 to Present) Demark Buy Setups could appear as early as post Tuesday's close this week, but we'll need to see at least some minor evidence of stabilization and price strength before thinking it's right to be long. The area at early March lows sits at 2722, which also represents a 38.2% Fibonacci retracement of the prior advance. So, Quite a bit lies between 2722 and 2739 that could have importance as support for this coming week, technically.


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Mid-caps have begun to show more serious signs of deterioration lately,dropping to the lowest level in relative terms to the SPX since 2010. The chart above highlights the relative chart of the S&P 400 Midcap Index relative to SPX. While much of the focus often is on Small-cap underperformance, the extent of this recent deterioration is notable and should be on the radar of most investors heading into a more challenging seasonal time of the year. At present, it's right to overweight Large-Caps much more than either Small, or Mid-caps.


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Credit spreads have been widening lately, and as this ratio chart of LQD to JNK shows, investment grade has just surpassed former peaks relative to High Yield made last December. This is thought to be somewhat problematic if this pace of widening continues in the weeks ahead given the tendency of credit spread weakness to lead equities. Charts going back since 2016 showed the initial breakout late last year during the October-December selloff, and now this rally has really accelerated in the last two weeks.

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WTI Crude oil is thought to be close to bottoming after a very severe drawdown in recent weeks. Targets lie at 51.50-52.50 which should be tested on Monday 6/3/19. Prices have nearly wiped away 60% of the entire rally from last year as of last Friday after peaking out on 4/23, near the same time that DJ Transports and NASDAQ topped out. Counter-trend exhaustion is within two days of forming, while momentum indicators like RSI have become deeply oversold. While the extent of the momentum acceleration makes anything more than a bounce potentially doubtful at this time, a low in Crude does seem likely this coming week. Importantly, given that Crude peaked out last October along with bottomed on 12/24/18 right when SPX did, not to mention its late April peak, any signs of Oil bottoming should also coincide with a low in stocks given the recent positive correlation trends.


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Treasury yields look to be closing in on strong support where yields should stabilize and turn back higher. Looking at charts of the US 10-Year Treasury Note yield, the acceleration over the last few weeks has now given up nearly 60% of the entire uptrend off the 2016 lows. Fibonacci support along with former lows from 2017 lie between 2.01-2.06%, a zone where one could consider taking profits in Treasury longs and attempting to play a bounce. Movement back up over 2.34% is necessary to call for any sort of meaningful low. Over the course of the next 3-5 trading days, a bit more weakness in yields looks likely.


Growth Vs Value- Surprisingly to some, the ratio between Growth and Value has not suffered along with the equity decline in May. The move back to new high territory in the S&P Growth index, SGX, vs the S&P Value index, SVX, has pushed back to new high territory, indicating a steady appetite for Growth even on broader market declines. One interesting fact is that Technology has actually held up better than most sectors in the last week given some of the advance in Semiconductor names. Thus, the landscape still seems to prefer Large Cap along with Growth.


Further strength in US Dollar vs Mexican Peso in the week to come. The decline in Mexican Peso last week following the Trump announcement of Mexican tariffs might seem to offset some of that news, and USDMXN still looks likely to continue higher in the near-term, with targets up near 20-20.50 before any real resistance. Thus, the thought of any sort of intervention to stop the decline in the Peso, for now, looks premature, and this sharp rise from last week in US Dollar vs Peso looks likely to continue. The larger resistance trendline lies directly above, but exhaustion counts are 3-4 days early. Thus, no reason to expect any sudden imminent reversal.


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Corn has now reached a short-term important area of resistance after logging one of the more explosive moves off the lows as has been seen in the last 10 years. In the 13 trading days since May 13, Corn has moved up nearly 20%, a huge move that has helped momentum improve markedly on all timeframes. Given the ongoing flooding int he Midwest, we've seen a very sharp move up in the Grains, in Beans, Wheat and Corn. While June is normally a subpar month for the Grains, this years's seasonal weakness might be delayed a bit given the lack of being able to plant given the rainfall. Overall, 432-40 is important, while over would drie prices up to test prior highs near 500. No evidence of any peak is near, however, so longs are still favored looking to sell into this first move into the high 400's initially.


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CBOE Put/Call ratio for Equities has now reached the highest levels of the year after having largely failed to respond to the initial 5% down in Equity indices. Technically this breakout looks bullish for Put/call to still push a bit higher, and is the first sign that fear is finally starting to creep back into the markets after some abnormal complacency.


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One gauge that looks close to oversold levels concerns the Percentage of stocks over their 10 and 50-day moving averages (m.a.) While traditional gauges of momentum are growing closer (SPX RSI is at a 36), the percentage of stocks trading above their 10-day has pulled back to 15% as of last Friday 5/31/19. Thus, when this gauge gets to Single digit territory,which looks not too far off inthe distant future, it should coincide with a decent low and bounce in SPX given that an overwhelming majority of stocks are trading under their 10-day m.a. Overall, this looks close and should be monitored for movement under 10 this coming week.













Defensive Sectors still right to favor near-term- 5 Stocks to consider

May 27, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2800-1, 2785-9, 2762-4, 2734-6

Resistance: 2892-3, 2900-1, 2921-2, 2952-4



This week we discuss 5 key defensive and yield sensitive stocks to consider, along with 5 charts that highlight some of this recent Defensive positioning and whether it can persist.





Important Developments of this past week (Shown in Bullet form)



SPX as well as NASDAQ, DJIA broke down to test meaningful support near mid-May lows. Trends and momentum have worsened near-term and volume has been heavier on down days vs Up. This largely supports the notion that further selling could happen the last week of May.



Only 39.80% of stocks are above their 10-day moving average, 43% of stocks are above their 50-day moving average, and 41% are above their 200-day moving average. This shows the extent of some of the deterioration in the broader market lately, despite stock indices still trading within 3% of all-time highs.



Bearish sentiment continues to build, for a variety of reasons (Fear of Economic slowdown, Ongoing Trade war concerns) Equity Put/call ratio remains elevated at 0.76 and AAII sentiment now shows more Bears than Bulls by over 11.5%



Treasury yields have broken down under support at March lows for US 10yr, which could be detrimental for Financials, and an ongoing concern that the bond market has no conviction in the economy. Technically, lower yields look likely for 5, 10, 30-yr Treasuries



Emerging markets remain underperformers near-term, and the MSCI Emerging Markets ETF, (EEM) has lost more than 10% of its value since mid-April, dropping 4 out of the last 5 weeks. Counter-trend exhaustion is premature for EEM, and a retest of last Nov/Dec 2018 lows looks likely before any stabilization.



Defensive sectors outperformed yet again, with good strength in the Utilities and REIT sectors, the latter which has now taken Technology's place for Best performing sector of the year. Healthcare has also made a resurgence. Staples handily beat Consumer Discretionary, and Tech finished near the bottom of the pack for the week, dropping another 2.79% (S&P 500 Info Tech index)



The US Dollar broke out in Trade-weighted terms to the highest levels since 2002 and remains technically attractive as a long vs EURUSD, GBPUSD and vs many Emerging market currencies. The strength vs Brazilian Real and Columbian Peso looks to continue, and last Thursday and Friday's dip should be a chance to position long in USD.



Crude oil's breakdown looks important and negative, and should lead to further intermediate-term losses in WTI Crude. While stretched at current levels, any bounce should lead to further selling in Crude and the Energy complex should be avoided near-term given the recent spike in volatility.



2's/10s Curve has flattened out appreciably in recent weeks after peaking near 25 bps in late April, right when many global Equity indices peaked out. Additional flattening looks likely this coming week down to 13-13.50 from current 15.40.



Small caps have fallen in relative terms to Large Cap in US markets to the lowest levels of the year, and the stabilization in April looks to have been temporary only. Large cap should be preferred over Small. and Growth still favored over Value. Developed markets meanwhile are on the verge of larger breakouts vs Emerging.





Key Conviction ideas heading into this week



Look to buy into any Equity decline this coming week into end of May into early June. While short-term trends and momentum are negative, intermediate-term momentum is still positive and insufficient damage has been done to turn bearish for the next few months.



Treasury shorts should be covered given last week's plunge in Yields down under support. Additional gains in Treasuries look likely for this coming week and it's right to be positioned long in 10-Year Treasuries and TLT, avoiding TBT for now.



Sell Developed and Emerging mkt currencies vs US Dollar. EURUSD, and GBPUSD still look likely to fall in the coming weeks and lows here look premature, regardless of Thursday/Friday gains. The US Dollar mild pullback wasn't sufficient to think the Dollar is peaking just yet. It's right to be long for a final push higher into June



Small cap deterioration makes it imperative to wait for evidence of stabilization before buying after this breakdown in IWM. Await better setups with regards to Demark based exhaustion



Both Technology and Financials look to have broken down in the short run, which represents 40% of the SPX. It's right to hold off on getting too aggressive in buying dips until evidence of more stabilization occurs.



Stick with Defensive this week- Buy XLV, XLP, XLU, VNQ. Healthcare increasingly is an overweight, and has broken out in relative terms. This should be favored for the next few months, while Utilities, REITS, Telecom and Staples should still be good bets and overweights for this coming week as the Defensive trade continues. (I list some of my favorites, below)



China, Taiwan and Korean Equities should be avoided near-term and look to underperform further on US Dollar strength. EEM and FXI both still appear like attractive shorts. No Change here. EM space remains weak, and right to hold off on buying



Commodity space showed brief stabilization, yet maintains strong downward pressure in momentum. It looks early to buy into this space at large. Any hint of Dollar moving back to highs would cause another leg down for this space, and Crude and most of Energy looks to have started that last week.



Sell any further escalation in Implied volatlity into June. Given the rising levels of fear given lack of a trade deal, and rising pressure on the Administration to act, it's likely that some kind of deal gets done. Sentiment has gotten more bearish, and given the lack of real deteriroation in the indices, this pop in volatlity likely marks a sale between now and August/September.

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Trends in broad-based equity gauges like the Value line Arithmetic index peaked out largely when breadth did back in late February. As the chart shows, price failed to exceed last September's peak, so a very different picture in indices like these as compared to the SPX or NASDAQ and stock gauges have lost ground down to near key support over the last week. Momentum, as per RSI, has gotten near oversold levels and will show some positive divergence on any further breakdown into end of May. Yet, it's important to watch this index as a guide for "stocks" vs just the SPX which is in far better technical shape.




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bearish for this coming week unless SPX regains 2892. It's thought that the lack of volume and above-average breadth on gains vs Declines this past week coupled with the short-term deterioration in Technical structure, still has the chance to lead stock indices lower into end of Month/early June before a bottom. While bearish sentiment is rising, we haven't seen proper signs of any real capitulation, by means of VIX backwardation(Spot VIX well above 2nd/ 3rd month VIX futures), capitulatory volume into Declining vs Advancing stocks (HIGH TRIN or ARMS index ratio >2), Equtiy put/call ratio at extremes (Getting there, but not yet) or counter-trend signals and/or divergence in VIX v SPX ( SPX goes lower, but VIX fails to rise) Above all, key sectors like Tech and Financials don't look to be stabilizing just yet and these are the building blocks for SPX. As long as Utilities and Staples are showing good strength, while XLK hits new lows, this minor selloff can extent a bit more. Gann -based targets for this coming week lie near 2734-6 at extremes up to 2762-4 on any decline down under 2800. This would make fear escalate, and should provide good risk/rewards to buy dips.


Intermediate-term (3-5 months)- Bullish- Near-term deterioration, even after 5 straight down weeks in DJIA, has not been sufficient to turn intermediate-term trends negative. The nearterm weekly momentum remains positive for SPX and not overbought after S&P completed the best quarter of performance since 1998 and through April, the best four-month kickoff to a year in over 30 years. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far. The one "Elephant in the Room" with regards to a giant Technical Negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. For now, this won't be a concern until more breadth divergence starts to happen on daily/weekly charts. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of more serious breadth deterioration and more bullishness to have concern on an intermediate-term basis. Advance/Decline for Equities did peak out with indices in early May, yet the resulting decline has not been all that severe. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020. However, the time period from mid-September into November could set the tone for 2020. Stay tuned.


5 Defensive charts that show ongoing positioning in this group, along with 5 names to focus on that are attractive

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The Consumer Staples group has turned up sharply in relative terms vs the broader market which began in mid-March as markets have continued to show evidence of Defensive positioning. Over the last three months, this group has outperformed all other S&P GICS level 1 groups with performance of 5.34% vs a broader return of 1.20% for the SPX. Staples now leads Consumer Discretionary in performance over the last 1 and 3 month periods, and is only 180 bps behind on a Year-to-date basis. Near-term this strength looks to continue as the relative chart of XLP v SPX has produced a rounding bottom formation and has turned up higher to show some good momentum. Many stocks like HSY, KMB, SJM, PEP, STZ have shown multi-month breakouts which have taken these stocks to multi-month if not yearly highs. The two stocks featured in this report, GIS and MNST, are technical standouts that look like better risk-rewards than the stocks hitting multi-year highs and are not as overbought. Overall, Staples still looks to show good relative strength into June, but it will be come a bit more selective as this rally starts to mature.

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VNQ has shown some excellent technical strength in recent weeks that has helped to lift this group out of its funk after multiple weeks of consolidation. REITS now lead all other Sectors on a year-to-date basis with returns of 18.01% vs S&P at 12.73%. Much of this recent uptick in relative strength has come as yields have broken down under recent support, but does not seem complete. Weekly charts show this lengthy base which had been a critical area for VNQ between $85-$87 that now looks to have been exceeded. In the short run, a move to the low $90's looks possible given this recent progress in the last couple weeks. However, it's thought that yields likely should stabilize and turn back higher in June, and this might mark a time to sell into this group within 3-5 weeks. For now, it's right to favor upside in VNQ and position long in the REITS.

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The REIT sector has achieved a weekly breakout in relative terms, which could allow for some near-term outperformance in the days/weeks to come. As weekly charts of the VNQ v SPX show, this group has been largely range-bound in recent months, yet began to trend up sharply when rates broke down last week. Given that Treasury yields still look to trend a bit lower near-term, it's likely that the REIT sector can show a bit more relative strength in the short run. Apartments still look to be an attractive way to play this space, and for now, this is a defensive group to consider given the uptick in volatility.

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Utilities have been "HOT" lately, trending higher, though this weekly chart suggests the group should be nearing a peak in the coming weeks. The Utes have now outperformed every other S&P sector in the rolling 1 month period since 4/24/19. As yields have broken down, this group has gained in relative strength and still looks likely to outperform into end of May/early June. However weekly charts going back since 2015 show prices approaching very formidable resistance which has now held on two former occasions on rallies. The third test is approaching and looks to be within 3-4 weeks of producing solid resistance based on a combination of Demark weekly exhaustion, along with overbought conditions. However, we'll need to see some evidence of yields bottoming and showing some degree of uptick to think this group starts to falter. For now, it should still be favored for gains, but given this chart, it looks right to consider this group a safe haven only in the short run. Using strength to sell into gains into June looks wise from a technical perspective.

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Summation index- Breadth has faltered since February. This smoothed version of the McClellan Oscillator has been trending down over the last few months, not dissiimilar from what happened last year when many stocks began to fall, yet, indices held up into late September/early October before peaking. While breadth overall is still favorable, with Advance/Decline near all-time highs, there has been some dropoff and it's important to be selective if this index is dropping sharply. When this can begin to stabilize and turn higher, it will give more conviction about being "long" and expecting stocks to rally back.

5 Defensive Stocks which look technically attractive for further gains

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Verizon (VZ- $59.32) This appears like a good risk/reward in theTelecom space and likely pushes higher to the mid-$60's in the weeks/months to come. VZ right now continues to base, with a bullish technical structure which has consolidated its first breakout over the last couple months. This recent churning has taken the form of a bullish Triangle pattern which would be broken on a move back up above last week's $60.54 high on a weekly closing basis. Getting above March highs at $61.19 would serve to add conviction for what should be a bullish push higher to the mid-$60s. While other competitors like T have begun to strengthen as well, VZ remains the more favorable of the two and should be overweighted here as a stock to consider during defensive times.


AvalonBay Communities - (AVB- $205.40) Breakout back to new all-time highs still looks to have upside. AVB successfully managed to exceed April highs coinciding with yields starting to break support last week. The breakout in VNQ on both an absolute and relative basis should allow for additional strength to occur near-term, and REITS like AVB have been consistent leaders and are technically well positioned after the recent move back to new high territory. Given that the Treasury yield decline looks to have more to go, Apartment REITS like AVB look to show even further strength. Weekly charts show counter-trend exhaustion to be at least three weeks away, and AVB looks to have upside to near 210-5 before this stalls out, but could trend up to $225 before hitting resistance. Given the extent of the consolidation near March/April highs, there will be some evidence of negative momentum divergence which would be a negative, but AVB should be given strong consideration given its recent push back to new highs as the REIT sector outperforms.


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First Energy (FE-$42.86) Bullish for gains to the mid-to-high $40's before stalling out. While not the most attractive technical name based on traditional trend following strength or momentum, FE appears like a good risk/reward as a former laggard that's now trying to play Catch-up. This Utility stock broke a lengthy three-year downtrend early this year and has accelerated ever since, trending higher, though not getting excessively overbought. This looks to be an ideal "Safe" name to consider technically given the deteriroation that's been ongoing in the Tech sector. While the Utilities overall look to be nearing peaks in the next 3-5 weeks time, this still has some room to move between now and mid-June, and should be favored for further gains as a way to take advantage of this recent upstart in performance.

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Monster Beverage Corp (MNST- $63.42) Bullish- Position long technically ahead of the breakout- MNST is one of the more attractive stocks within Consumer Staples right now given its technical setup as this has NOT yet broken out like many of its peers. The range-bound trading over the last couple years has set up an attractive bullish base that likely should lead to a breakout back to the upisde in the weeks and months ahead with the stock trading up to the low to mid-$70's. The tight base is particularly attractive as part of the intermediate-term uptrend as multiple decline attempts have failed and have led right back to near former highs. One should look to consider this here, technically before the breakout has occured and then add to positions when this has been confirmed.

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General Mills (GIS- $52.81) GIS looks apt to play catchup after the first real evidence of its intermediate-term downtrend being broken over the last few weeks. This is a bullish development and should lead this higher to the low to mid-$60's. As monthly charts of GIS show, this underwent a massive pullback after having become quite extended ino Summer of 2016. While the stock shed half its value over the last two years, it recovered nicely starting last December, which appears to be an ongoing process. Given the breakout, one should bet on continued gains in the weeks ahead and looks to be an attractive play within the surging Staples space as a stock that is defensive and could play "Catch-up"

Emerging markets turning down sharply on Dollar gains

May 20, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2840-2, 2825-7, 2800-1, 2785-9

Resistance: 2900-1, 2921-2, 2952-4



This week we discuss 10 charts of equity indices, Treasuries, commodities and currencies, as we've seen some important moves in the past week. As always, we'll highlight some of the more key developments which occurred and then suggest some attractive risk/reward ideas and how to play them.






Important Developments of this past week (Shown in Bullet form)



SPX near-term trend looks to have bottomed where it needed to, right near 2800 and then made an above-average push higher on decent volume and breadth last week. Prices remain only -2.8% off all-time highs



The Monday morning low 5/13/19 coincided with a big uptick in Put/call spikes intra-day, which proved to be a meaningful signal. Markets also showed huge volume into downside vs upside stocks, marking the first 90% down day that we've seen since 12/4/18. After the prolonged decline from 4/30, this was instrumental in giving clues about a potential short-term low.



Fear seems to be on the comeback, as Equity Put/call ratio moved to its highest level of the year +0.81%, while AAII sentiment now shows more Bears than Bulls by nearly 10%



Emerging markets continue to face downward pressure, and relative charts of Developed vs Emerging show the potential for this recent underperformance to continue in the weeks ahead.



Defensive sectors showed their second week of strong outperformance, while Financials, Tech, Discretionary and Industrials all lost 1% or greater in trading. REITS, Utilities, Consumer Staples, and Communication Services were positive for the week



US 10-Year Treasury yields declined for the fifth consecutive week, yet with a meaningful retest of the 2.33% yields from March that looks to be trying to hold. Movement back over 2.50% is necessary to call for a bottom in yields.



The US Dollar broke out sharply vs many Developed and Emerging market currencies in the last couple weeks. This strength looks to continue short-term, and should put further pressure on commodities and Emerging markets.



Commodities look to be breaking down under 2017 lows, per the CCI index, and given US Dollar strength, look to weaken further in the short run, before bottoming.



Growth stocks have climbed back to new highs vs Value, exceeding former relative peaks made back in September 2018. While stretched on daily charts, this looks to further postpone any transition into Value.



Percentage of stocks above their 10-day ma has risen slightly to 45.15%, while those over their 50 day and 200-day ma have dropped to 48.61, and 47% respectively.





Key Conviction ideas heading into this week



Look to be long Equities, unless SPX gets back under 2840, which would switch positioning to short for a move down to 2775-85, or a max near 2723-5



Treasuries could be peaking out, and Yields look to be stabilizing near prior lows from late March. Shorting Treasuries looks to be a good risk/reward for the US 10-Year Treasury unless rates move under 2.33%.



The US Dollar's breakout looks to have further to extend and it's right to avoid buying dips in GBPUSD, or EURUSD. Lat Am Currencies such as Brazilian Real, Columbian Peso and Chilean Peso all look to extend losses vs US Dollar



Small caps can still work, provided prices remain above 151. This looks to be a better risk/reward for buying into IWM, but important that last week's lows are not violated.



Financials and Healthcare are two sectors to favor, both of which could show better performance than Technology in the coming months. Charts on both XLF and XLV look to be attractive



China, Taiwan and Korean Equities should be avoided near-term and look to underperform further on US Dollar strength. EEM and FXI both still appear like attractive shorts.



Commodities look to extend down further, and it looks premature to buy dips just yet

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SPX trend on a weekly chart shows the index's uptick in volatlity since 2016, where the index made substantial peaks both in January and September 2018, only to recoup all of this damage into late April. This weekly chart still depicts bullish momentum per the MACD indicator, which failed to get derailed on weakness in early May. The pullback moved to within 20 points of the 2785 target, bottoming just over 2800 before recouping about half of the losses. Unless S&P were to get under 2722, which is a 38.2% retracement of the rally up from December 2018, it's thought that this pullback is one to buy into, and rallies can happen into Mid-June without too much trouble. Sentiment has shown some pretty severe contraction in the last couple weeks, perhaps understandably so, with this trade war not producing any meaningful results thus far. But this combination of ongoing uncertainty coupled with just minor weakness in the index is seen as a positive for now. Until/unless SPX gets down under 2840 this week (which would produce a pullback to 2775-85) or under the first 38.2% Fibonacci retracement of this four month advance, SPX still has an above-average likelihood of moving back to new high territory. Upside targets lie at 3040-75, and any further weakness this week should be buyable for additional gains, as this rally does not seem complete.







SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish barring a move under 2840 on a close,which should lead to a pullback to 2775-85 before any bottom. The move late last week back to multi-day highs was seen as constructive for SPX, as it happened on decent volume and breadth. This broke the one-month downtrend from early May, and goes along ways towards thinking the pullback over the last few weeks is likely complete. Sentiment turning quickly bearish is another reason for optimism, and even if 2840 is broken, it's thought to prove short-lived, and lead just down to 2775 before rallying back sharply. Overall, weekly momentum is positively sloped, so the combination of a pullback to buy into which doesn't change momentum, but which does cause an uptick in bearish sentiment, is thought to be something to consider buying into. Getting back over highs set between 43/30-5/1 would set the stage for a move to 3040-75.







Intermediate-term (3-5 months)- Bullish- The nearterm weekly momentum remains positive for SPX and not overbought after S&P completed the best quarter of performance since 1998 and through April, the best four-month kickoff to a year in over 30 years. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far. The one "Elephant in the Room" with regards to a giant Technical Negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. For now, this won't be a concern until more breadth divergence starts to happen on daily/weekly charts. Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains into the Summer/early Fall before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioration and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.




10 of the more important charts for this week

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Dollar near-term bullish- Could continue to put pressure on Emerging markets- Daily charts of the Bloomberg Dollar index (above) looks to have made one of the more technically significant moves last week after its highest weekly close of the year. This exceeded the minor consolidation from April and has coincided with strength against Majors like Euro, Pound Sterling and Aussie Dollar, the latter which dropped to the lowest levels in over 3 years. Moreover, this strength has been even more pronounced vs many of the Emerging market and LatAm currencies, as we've seen breakouts in the US Dollar vs Brazilian Real and also Columbian Peso just in the last week. In the short run, this Dollar strength looks likely to persist into June, which could put further pressure on Emerging markets and commodities.

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Ratio charts of Developed vs Emerging market indices show the potential of a larger breakout in relative terms for Developed markets which could play out in the weeks ahead. This recent Dollar strength has caused Emerging market underperformance, and this chart seems to suggest it very well could get worse. A move above April highs in this ratio would result in meaningful outperformance in the short run for Developed v Emerging, and this monthly chart above has formed a Cup and Handle pattern which normallly are resolved by breakouts to the upside. Overall, this helps to add conviction to the idea that Emerging markets are likely to get worse, before they get better, with China, Taiwan and Korea all being chief culprits which have begun to weaken substantially of late.

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China vs the US looks to weaken further in the short run, and could weaken further relatively speaking to test 2018 lows before showing any real stabilization. This chart of FXI to SPY produced a false breakout back in 2017 that was promptly given back last year. While there was some meaningful outperformance in China spanning six months from last October until April of this year, this was given up in a period of roughly one month coinciding with US Dollar gains along with trade uncertainty ramping up. Overall, further weakness looks likely in China which should underperform into June before trying to bottom out. One should avoid trying to buy dips until weekly Demark exhaustion is in place, which will require a move back to last year's lows before being complete. FXI appears like a better short near-term, and additional pullbacks look likely before this can bottom out.

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India is one Emerging market that's Technically appealing to consider.While many emerging markets have experienced quite a bit of technical deterioration of late, India is one of the few that looks attractive just as Elections are set to conclude. The uptrend in the Ishares India 50 ETF, INDY, has been very bullish as shown on weekly charts since lows were made back in 2013 and now recent weakness last week should represent an excellent buying opportunity, technically speaking. Momentum remains positively sloped, and structurally this has improved after having retested and now pulled back from early 2018 highs. Longs are favored with expectations of gains back over 40, while only a move down under $34 would postpone this rally, so this looks to be the risk to the downside.

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Commodities look poised for a near-term breakdown after repeated tests of support, but this could lead to a final pullback in this downtrend and represent a chance to buy into this weakness for gains in the months to come. The CCI index, the Thomson Reuters Equal-weighted Commodity index, has slipped sharply in the last week given the strength in the US Dollar, and looks apt to show further near-term weakness as Dollar strength continues into June while Treasury yields attempt to bottom out. This could put pressure on precious metals, while the Grains could suffer additionally given poor seasonality coupled with lack of a trade deal. Technically speaking a retest of prior lows made last year looks increasingly likely, and should be an area to consider covering shorts and being long. Interestingly enough, Weekly charts showing Demark indicators look to be within 4-5 weeks of having buy signals line up on the CCI index. Yet, this would require further drawdowns into early June before these would materialize. For now, the commodity space looks like a tough place to be. However, one could consider buying on any further weakness in the weeks ahead.

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Treasury yields have shown some signs of stabilizing near prior lows over the last couple days in TNX, and any ability to turn higher here would be seen as a sign of comfort to risk assets, and specifically to the Financials sector. As this daily TNX chart shows, yields peaked out near 3.25% in the US 10Year last November. We've seen a steady slide in yields with an ongoing pattern of lower highs and lower lows. Last week, however, there appeared to be some stabilization over the course of a few days right near prior lows at 2.33% for TNX, a key support level. Some evidence of positive momentum divergence has been in place for the last few months, and Demark indicators showed signs of downward exhaustion late last week (TD BUY SETUP) While it will take a move back over 2.50% to break the downtrend and climb above 2.57% to have real certainty of a low in yields, we appear to be nearing a juncture where this can occur. One can sell Treasuries with a limited downside risk, as if 2.33% is broken, this would postpone the yield selloff and serve as a stop for Treasury shorts.

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Financials have begun to show more signs of strength in Equal-weighted terms, which could be bullish for this group in the months ahead. Looking back to last week's performance, Financials certainly didn't appear too strong on the surface. This group underperformed all other 10 S&P groups with returns of -2.09%. However, last week's pullback directly followed a very sharp period of gains for Financials in the month of April, which saw ETF's like XLF reach the highest levels since last September. Looking at relative charts of the Equal-weighted Financials index vs XLF as a ratio, we see some definite signs of progress lately, which look far more constructive than what last week's performance might suggest. This group appears to definitely be at a key juncture relatively speaking, and it wouldn't take much before this group would begin to show some real outperformance. Relatively speaking, breaking out of the downtrend from last Summer would be a very good sign and in absolute terms, this would occur in XLF with any gain back over $28.14, made the first day of May. Much should depend on whether Treasury yields and the yield curve can stabilize here and begin to turn higher. However, this looks to be right around the corner and should be watched carefully for evidence of confirmation of this strength.


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Technology- Monthly Negative momentum divergence is a concern for this group . Overall, Technology has definitely started to show some evidence of slowing lately, which daily charts showed last month after the breakdown in 2-3 month uptrends for the group. At present, this near-term momentum shift has largely been substituted by strength in other sectors. The monthly chart above, shown as a relative chart of Invesco's Equal-weighted Technology ETF (RYT) vs the broader market still looks to be in good shape based purely on trend alone, with last month's pullback in Tech appearing like just a small "blip" on the charts. However, gauges of momentum like MACD show the highest peak in momentum having been made last year, with this year's early price runup occurring at lower levels in momentum. This is important and a negative for the intermediate-term perspective for Tech, and serves as a warning sign. Any break in the trend would suggest an intermedaite-term decline getting underway, which likely would be negative for the broader stock market given Tech's representation in SPX. For now, this appears as a warning only, but would take on much greater significance on a break, and is something to watch out for going forward.

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AAII Sentiment Survey- Back to inverted levels as the bears outweigh the bulls after last week. Such a Flip-flop in sentiment quickly should be viewed quite positively from a contrarian perspective. While the percentage Bears leads Bulls by 9 percentage points, this has gotten to the most bearish point in sentiment all year. Thus, it's thought that despite the wobbling in stocks over the last couple weeks, the larger trend should prove to be fine, for now, and lead to a buying opportunity back to new all-time highs.

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Equity Put/call ratio has just hit the highest level of the year after last week's spike, signifying a definite uptick in fear. While indices remain below all-time highs by just a fractional amount, it's thought to be comforting to the bulls that there remains such a level of uncertainty. Whether it be due to trade tension, or the dimming of the global growth outlook, it's typically important to watch gauges of sentiment like this closely. In this case, the recent escalation in fear should put a floor into stocks on any further weakness, and likely limit the extent of any further stock index deterioration, for now.

10 Charts of Winners, Losers on Tariff Escalation

May 13, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2825-7, 2800-1, 2785-9

Resistance: 2900-1, 2921-2, 2952-4



This week we discuss important charts of assets which might be winners and losers in this increasingly real Tariff escalation. Steel and Aluminum are thought to be the "winners" in a steadily increasing Tariff filled world, and increasingly look much more attractive from a risk/reward basis after the extent of the decline since last Spring. Automakers, on the other hand, are thought to be potential underperformers. However, as charts show below, both F and GM are looking increasingly better given the short-term improvement from last December as part of ongoing long-term bases. One thing that's not arguable, charts of US Agriculture remain in tough shape, bearish, accelerating lower and no meaningful signs of bottoms in sight. Canada also looks to be rolling over, and given its status as the largest exporter of Steel and Aluminum, looks to be in a tough spot technically after the extent of the rally off December lows. Overall, these charts will try to showcase a few potential winners and a few potential losers of this Tariff battle.









Important Developments of this past week (Shown in Bullet form)



SPX near-term trend is bearish, yet with some above-average signs of stabilization late last week, largely on little to no news regarding Trade. Momentum has grown oversold only on hourly charts, though definitely not oversold on daily nor weekly. Until 2900 is exceeded, it's right to stay the course in expecting possible weakness to 2800.



The last 2 days of last week, SPX closed well up off early lows which is seen as a sign of strength. TD Buy setups are within 3-4 days of forming, and look to occur ABOVE the TDST line. In plain English, this means that a bottom to our selloff should occur this coming week in all likelihood, barring a severe pullback that undercuts 2775.



Emerging markets were hit hard in the last week, with declines in EEM, along with many Latin American indices/gauges like ILF, EWZ, EWW,



Fear gauges like the Intra-day Put/call Ratio on Equities jumped sharply late last week, coinciding right with the low late morning on Friday.



Tech was the worst performing sector last week while Defensive sectors ruled. While all 11 sectors were negative for the week, We saw Consumer Staples and Utilities along with Real Estate, turn in performance better than 7 other sectors, all in the top quartile, while Energy bounced after recent underperformance.



US 10-Year Treasury yields declined for the fourth consecutive week, with yields pulling back to just 12 bps above March lows.



The US Dollar has been largely range-bound in recent weeks after April gains vs both EURUSD and GBPUSD.



Commodities have now sold off for five straight weeks, with gauges like the CCI index hitting the lowest levels since 2016



Both Gold and Crude oil showed some relative outperformance within the Commodity space, stabilizing while others fell sharply, like Cotton, Sugar, Coffee, and the Grains.



Style-wise, Growth has NOT really faltered much at all during this pullback and has been on a steady climb since mid-April.



Percentage of stocks above their 10-day ma fell to 35%, while those over their 50 day ma were down to 56%.





Key Conviction ideas heading into this week



Look to cover shorts and buy US Equities on any pullback down to 2800 with idea areas of support at 2775-2800. For now, trends remain bearish and right to still be defensive.



Treasuries should still be favored near-term as this TNX decline is still above targets and could reach prior lows near 2.33% in yield before any bottom. TLT and other ETF's like TMF, TMV should be favored for gains



The US Dollar's breakout has consolidated sufficiently and this looks to be an attractive risk/reward to sell into both EURUSD and GBPUSD, expecting declines in the weeks and months ahead. If May lows are broken, than "all bets are off" and this would likely signal a larger US Dollar decline.



Small caps should be favored near-term after the strength seen in April. Movement over prior highs near 159.75 in IWM were consolidated last week and should represent a good risk/reward between 150-154 for buying weakness for a move back higher over 161.



Gold is getting very close to a breakout of its recent three-month downtrend which would argue for additional strength in Gold back up to the low to mid- 1300 range. Last week's Weekly mentioned Gold turning more positive above 1280 and this has to be watched carefully now for evidence of accelerating higher. As has been mentioned previously, 1375 is the larger "line in the sand"



Outside of the Metals, it still looks early by 1-2 months to take a stab at buying commodities, and any hint of Dollar gains in the next few weeks would prolong this even longer. For now, commodity benchmark indices have plummeted, largely based more on lack of potential future demand from China rather than any real Dollar strength. Overall, it looks early to expect lows in commodities.

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SPX trend remains bearish after the break of 2900 last Tuesday which served as the first warning sign, followed by the break of 2877, mentioned in the last Weekly Technical Perspective. While the last two days managed to close up meaningfully off the lows, there hasn't been sufficient strength to argue that lows are yet in place. The area at 2775-2810 looks important on further weakness this week, representing both the first meaningful Fibonacci retracement area of the advance from December. Additionally we see that TD Buy setups could be in place on further weakness in the next 3-4 trading days. This area of TDST support lies at 2798 and should provide a cushion if reached sometime mid-to-late this coming week. For now, trends would require a move back up over the area of the prior breakdown, at 2900-1 before being able to turn bullish. Such a move likely would help lead S&P back up to 2950 which for now looks premature.




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bearish under 2901, Bullish over. This past week's breakdown resulted in a quick move down to 2825, new four week lows, causing a further erosion in near-term momentum which failed to reach minimum downside targets to think the decline had run its course. While 2840 was important mid-week in Futures, the counter-trend exhaustion counts have not yet been triggered and momentum is not officially oversold on daily charts. Some evidence of fear on the rise late last week with intra-day Equity Put/call data, but until this materializes on a closing basis and we see prices start to push back higher, with stabilization in Technology in particular, it remains tough to be too positive here in the short run just yet. The back to back movement off the lows last Thursday and Friday DO look encouraging, but yet given an absence of rebound in prices above key levels and lack of any progress in trade negotiation, trends near-term remain negative.







Intermediate-term (3-5 months)- Bullish- The nearterm weekly momentum remains positive for SPX and not overbought after S&P completed the best quarter of performance since 1998 and through April, the best four-month kickoff to a year in over 30 years. While near-term momentum has rolled over a bit and breadth has faltered since late February, we haven't seen much damage, if at all, to the larger trend thus far. The one "Elephant in the Room" with regards to a giant Technical Negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. For now, this won't be a concern until more breadth divergence starts to happen on daily/weekly charts. Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains into the Summer/early Fall before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioration and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.







10 charts of assets potentially affected by further Tariff hikes

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SLX-VanEck Vectors Steel ETF-Attractive from a counter-trend standpoint. Steel companies could potentially prosper in the wake of higher tariff prices, both by higher steel prices, along with being forced to buy more domestically. Weekly charts of SLX show the steady slide of Steel stocks since peaking out last February. While SLX is down more than 25% from last year's peak, (and still down over 65% from its all-time high peak in 2008, the progress it's made from 2016 is somewhat encouraging technically. The entire consolidation from last year still lies within the upper 1/3 of the range in the last two years. Furthermore, the mild downtrend was exceeded in late 2017 which has helped intermediate-term momentum to stabilize. The pattern resembles the making of a bullish base, which would grow far more bullish over $52 for a larger move back to former highs. Downside should be limited in this case to former lows at $33.66, but looks like a good risk/reward given the potential upside, as well as being able to buy into this 25% cheaper than last year. When the Dollar starts to turn down more aggressively, this should also be a benefit to Steel.

US Steel (X- $15.66) Pullback to long-term support should offer an attractive entry point. Looking back at the last 10 years of trading, X has bottomed out on multiple occasions near this level, starting back during the low following the 2007-2009 bear market in 2009. During 2011-2013, US Steel bottomed out between 16 and 18, while briefly undercutting this in 2016. Monthly momentum is nearly oversold again, and the decline in Steel on looks to be very overdone, with signs of TD Buy Setups now in place (9 consecutive closes under the close from four months ago) Overall given the downtrend from last year, it will make sense to keep size small until X can at least make a new monthly high. But this clearly looks to be an interesting risk/reward here given the extent of the decline while tariffs look to be increasing, not going away.

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Alcoa (AA- $25.04) Alcoa might also stand to benefit, as the aluminum industry would also be able to charge even higher prices and expand production. This stock has also been very hard hit of late, dropping nearly 60% from highs made around this time last year, just 13 months ago in April 2018. Technically trends started to weaken last Summer as AA began to lose ground and this stock accelerated lower to below 50% absolute retracement levels. Then a four month sideways period of consolidation started before this broke down again in the last few weeks, closing last week at the lowest level since late 2016 just ahead of the election. Weekly charts will show counter-trend exhaustion this coming week as a "buy" using the TD Combo indicator from Demark (not confirmed) but signs of the Aluminum industry rebounding "should" be good for stocks like Alcoa.

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Century Aluminum (CENX-$7.88) Increasing stabilization here in recent months after enduring an even more precipitous drop than AA in the last year. CENX traded up near $25 last Spring and has fallen to under $10, a huge 66% decline. Momentum on weekly charts has begun to improve in recent months on the decline flattening out, yet still no real signs of this turning higher. Movement back up over $9.91 would bring about an above-average intermediate-term gain for CENX, and should allow this to recoup at least 1/3 to 1/2 of its prior decline. The area at $5.40 should prove to be maximum support on pullbacks, so the risk/reward here is quite attractive in risking $2 on the downside for a chance to get back to the $20's.

Ford (F- $10.38) Ford is looking increasingly more attractive from a counter-trend perspective, despite this having traded lower in a very symmetrical downtrend for the last five years. The last major swing peak happened near $18 back in 2013/4 and ever since, this has seen a steady slide. Since the beginning of 2019 however, Ford has pushed higher from $7.41 up over $10 and still could reach $11.50-$12 without too much trouble before this stalls out. The ability of F to reclaim $12.15 would be a major victory in surpassing this long-term downtrend, arguing for much higher prices. For now the long-term monthly chart pattern since 2001 looks like a giant long-term base in the process of being built. Thus, when many speak of US automakers losing out given the amount of Steel in their cars, technically it's fair to say that this very well might be the case of "sell the rumor" buy the news, and that tariffs might prove to be rolled back, given how interesting the charts on the Automakers are starting to appear on long-term charts. Yet, it's right to hold off on getting too enthusiastic just yet until verifiable progress has been made in exceeding $12.15. But such a move would likely lead to Ford climbing at least 50% technically, so this is worth monitoring closely.

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General Motors (GM- $37.89) Attractive to take a stand from a counter-trend perspective after its recent drop from over $40 and would be right to buy dips unless this gets under $36.25 which would likely allow for a final washout down to near $34 before this bottoms. Similar to Ford Motor Co, GM has been forming a lengthy base for some time, most recently from the highs made in 2017 in the mid-$40's. While its near-term trend is negative, Automakers like GM are thought to have different issues besides just Steel rising in price due to tariffs. After all, these stocks have languished in range-bound consolidation during a multi-year decline in Steel. Thus, a mild uptick in Steel prices likely wouldn't be the factor that causes these to remain under pressure in the months ahead. Weekly momentum has been upward sloping and rising since last December, and it's thought to be wise to try to get involved with stocks like GM and F which have already been beaten up badly and likely would not suffer the same degree on any market pullback. Movement back over $41.50 would be a very bullish move for GM, while it's recent pullback has given investors a better risk/reward to try to buy dips.

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Soybeans - Grain charts remain bearish and tough to bottom pick-Soybean charts continue to be a major source of focus during these Trade talks given that not only China is dependent on US Agriculture, but also Canada to the immediate North. Given that Canada imports ~$25 billion in agricultural products each year from the US, if tariffs are put into place that end up harming Canada, they likely could choose to retaliate. Technically speaking, the decline in Grains has been seemingly relentless over the last seven years since peaking in 2012. The breakout attempt in Beans in early 2018 proved to be very much the "Head Fake" The subsequent breakdown caused this entire pattern to be viewed as a symmetrical triangle that could lead to a more substantial decline. (False patterns tend to be important sometimes in their velocity) Last week's close has now brought prices to the lowest levels since 2007. Weekly momentum has gotten oversold but yet countertrend measures still look to be 3-5 weeks away. Furthermore, from a monthly standpoint, the larger charts still look quite unattractive and require some real improvement in getting back over 900 before paying much attention. In the short run, additional losses here look likely.

Canada -SPTSX-(S&P/TSX Composite Index ) Increasingly unattractivehere with prices seemingly having stalled out near highs of a long-term trend channel going back since 2007. It's been thought that Canada could be one of the largest losers in the event that tariffs continue to be hiked. Canada is by far the largest exporter of foreign Steel and Aluminum coming into the US, and despite having rallied over 15% from last December lows, weekly charts show this area to be very strong resistance, having held on numerous breakout attempts going back over the last 10 years. Prices violated the four month uptrend in the last two weeks, and Demark exhaustion is present on weekly charts at recent highs which has coincided with peaks in price historically, when looking back in 2014/5, 2011, and also in 2007. While getting over 17,000 would negate any negative thoughts, the risk/reward seems to suggest selling into gains and awaiting the outcome in the next 4-6 months, given a poor technical risk/reward above 16,200. Intermediate-term support lies near last year's lows at 13776, which can't be violated without severing the entire uptrend from 2009.

USD/CAD - Dollar/Loonie intermediate-term breakout has since started to stall. Looking back, the pattern became far more bullish for US Dollar vs Canadian Dollar back in 2013 when the breakout occurred above this long-term trendline. Movement up to 2016 occurred, but since has proven very choppy and uneventful. Technically speaking it's still worth being long US Dollar vs Canadian barring a move down under 1.3275 initially, which would arouse suspicion. Further declines that undercut 1.3069 would argue for some meaningful Canadian dollar strength, indicating that tariffs likely had been avoided. For now, this is too premature to call and still likely that additional losses happen for the Canadian Dollar (shown as gains on this chart v USD) Movement back above 1.3661, while not expected immediately, would be very bullish for US Dollar /Canadian Dollar cross, causing a move up to the low 1.40s range. Overall this is important to monitor, but for now does not give a clear cut message given the last few months of trading.

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Crude oil's decline looks to be close to stabilizing near-term but yet still bearish on the trendline break. While the break of $63 was definitely seen as a bearish development, there hasn't been sufficient strength to think any type of meaningful low is yet at hand. Looking back, Crude's breakdown along with Treasury yields occurred just before Equities started to weaken (interesting given that both bottomed on the same day back in December 2018) While the Venezuelan and Iranian tension might eventually drive Crude back higher to retest recent highs, the extent of the breakdown in prices on daily and weekly charts looks more serious than anything we've seen in the last four months. Pullbacks to $58.50-59 look possible and this should allow for a better risk/reward situation to buy into. If prices turn up this week and get back above $63, then any further decline is postponed and a larger bounce to the mid-to-high 60s should get underway.

Trade tension brings about early Futures plunge to start the week

May 6, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2882-4, 2865-7, 2836-7, 2785-9

Resistance: 2921-2, 2945-9



Summary: Bullish trend could be under pressure in the short run with a close under last Thursday's lows at 2900-1 (SPX & ES_F) US Futures have plummeted Sunday evening as Trump threatened to hike tariffs this coming Friday, while China considering delaying the upcoming trade talks. This would represent the first real sign of extreme price reversal from highs. Even if this proves short-lived and tariffs are not hiked and prices move back to highs, it will take an even further toll on momentum which has been tapering off in recent weeks. Bottom line, failure to recoup what's been lost Sunday evening should jumpstart at least a minor correction for US Stocks.



Looking back, the first four months have certainly been one for the record books. S&P has pushed higher by over 17%, representing the best start to a year in over 30 years. US indices have reached new all-time high territory (except the DJIA) ,and have done so largely in tandem with a global bond market rally, while the US Dollar has strengthened, and Commodities have had a difficult time finding Footing. Meanwhile, the FOMC meeting results largely seem to have comforted the market, and prices rose to close near highs of the week. While the net change this past week was only fractionally positive, groups like Healthcare and Financials showed very good progress, each up more than 1% to lead performance over all other Sectors. Meanwhile, Energy turned down sharply, dropping 3.26% as Crude oil's sudden drop resulted in many stocks violating uptrends from earlier this year.



Overall, the two biggest technical developments heading into this past week were certainly the breakout in Treasuries, along with a similar move in the US Dollar. Commodities turned down sharply and have fallen hard now for the past couple 6 weeks. Emerging markets and China have also faltered. Meanwhile many Equity sectors which coincide with Commodity performance have also been hard hit, Materials being one in particular, though with Energy being certainly more popular and a larger percentage of SPX. But the key theme currently is that commodities are NOT the place to be near-term, and that Dollar strength has hurt many commodity specific names.



Meanwhile, Healthcare has come back with a vengeance, as last week's Weekly Technical Perspective discussed. This group makes a lot of sense from a risk/reward perspective after a lousy first four months and then heading into a seasonally bullish time for the group from May-July. Financials also are a group worthy of mention that had underperformed dramatically but have come back strongly given the Yield curve steepening over the last month. We've seen minor breakouts in stocks like BAC and C, very meaningful stocks to the Financial space, while the longer-term downtrend in Financials is now being challenged. ( Some thoughts and charts on this below)



Bottom line, heading into the month of May being overbought certainly gives reason for pause, as market participants know that this rally is likely running on borrowed time, being up nearly 20% heading into a seasonally weak time. (We'll see if Trump's comments prove to lead to action, or whether this is just a rumor and the Trade talks can resume. ) The last few weeks have certainly felt like a stalling out was approaching, with groups like Semiconductors turning down sharply and big gap-downs in key stocks like MMM and GOOGL while groups like Healthcare have been left to pick up the slack. Yet, counter-trend exhaustion is all but non-existent currently after it failed across the board in early April. It's thought that if indices are going to make any kind of meaningful peak, there should be widespread exhaustion across indices and sectors. The intermediate-term momentum is also still quite positive, and many remain under invested, waiting for that first big pullback to buy into. Sentiment polls are largely in agreement with this, whether it be AAII, or BofAML Portfolio Managers sentiment polls, showing a willingness to stand aside and not participate in this largely Tech dominated rally.



All in all, despite some minor negatives with regards to Technology stalling out a bit and lesser breadth now than late February, we've seen some successful rotation without harming price action one bit. Provided that uptrends remain in place, it's right to stick with trends and expect that S&P (when getting over 2950) should have little overall resistance until 3040-70 and should still be trusted. If overnight weakness persists into Monday and can't be recouped, then on evidence of Tech and Financials turning down, along with Healthcare, the three largest percentage sectors for SPX, it will be wise to take profits and/or stand to the side. For now, a long bias still makes sense. If/when SPX gets back over 3025, the time will be right to switch intermediate-term views from bullish to Neutral with any hint of larger decline bringing about a possible negative view, particularly into this Fall. For now, it's right to stick with trends





Key Conviction ideas heading into this week



Technology has shown some signs of waning in the last couple weeks, which should be watched carefully in the coming week. While prices and relative charts have stalled a bit since 4/24, they have not yet turned lower, but any breakdown in Tech over the next few weeks would be seen as a negative and as a bearish catalyst for stocks.



Financials outperformed all other sectors besides Healthcare this past week, returning 1.21% in S&P 500 Financials index vs a return of 0.20% for the broader market. Relative charts look to be very close to breaking out of trends since early last year, and something of the sort would be used to FOLLOW this group, expecting meaningful outperformance in the weeks and months to come. For now, Financials as a sector lies at Make-or-Break levels, but truly important to the market.



Healthcare should reach its first short-term target this week, and for those not involved, I'm expecting some kind of stallout into this coming week on a very short-term basis. Longer-term, I do believe Healthcare outperforms and should still turn in above-average performance for May/June/July. The next week will show whether this group just stalls out, or whether it reverses briefly (which would be a buying opportunity) Healthcare Services (XHS ) and Pharmaceuticals (DRG index) could outperform and should be overweighted.



Movement in both the US Dollar and in Treasuries have proven a bit "choppier" in the last week, and while Treasuries did extend gains down to near the first 2.45% target, the snapback thus far has left Yields near key junctures. The US Dollar meanwhile, broke out and then consolidated gains over the last 2 weeks, and also will need to show some signs of stabilizing here.



WTI Crude's decline looks to be nearing support, but could still weaken towards %$58.50-$59 in WTI this coming week before putting in a short-term trading bottom. As discussed last week, the larger breakdown of this trend from December looks bearish and likely puts in a near-term top that doesn't get exceeded right away. Given the prior Positive correlation between US stocks and Crude (both bottomed on 12/24/18 and moved straight higher) it's important to watch Crude carefully



Energy as a sector should be nearing its first area of support after the breakdown over the last 2 weeks, but this looks meaningful and negative technically. One should use gains in Crude as a chance to sell into this into mid-May, expecting further intermediate-term weakness in this sector. Relatively speaking, Energy stocks violated support last week on Crude's decline, making this sector one to avoid.



Industrials as a sector still look quite bullish technically after the breakout into late April and resulting consolidation. Transportation stocks look like a group to favor and one should stay long Industrials barring a move back under 76.59 in XLI or under 10630 in DJ Transports.

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MSCI World index needs to be highlighted again this week, as prices have pushed up to within striking distance of September 2018 highs and are now showing their first signs of counter-trend exhaustion on this rally. This suggests a high likelihood of at least some kind of slowdown over the next few weeks and MXWO should be watched for evidence that prices slow down here and reverse, or managed to successfully get back above this prior level of highs last year. Both would be important developments, but until a breakout happens, the higher probability result is that this rally slows.




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Under 2901 on a close turns trend bearish, and could bring about quick move down to 2795-2800. Over 2901 keeps trend bullish. Tech has slowed a bit and Financials are up against important relative resistance, but meanwhile, we have bullish price action out of the Industrials (Transports) and Small caps have come back with a vengeance. Volume, breadth have been largely subpar, yet we haven't seen much evidence of price weakness just yet (And maybe last night's pullback is the start) For now, 2901 is key and under at 2889, 2877. Meanwhile the ability to recover and regain 2950 this week points to 3040-75 which should be an area to sell into.






Intermediate-term (3-5 months)- Bullish- The nearterm weekly momentum remains positive for SPX and not overbought after S&P completed the best quarter of performance since 1998. While XLK, XLY and XLI were all up near former peaks, it will be right to follow prices should they get above, until some evidence of weakness arises. The one "Elephant in the Room" with regards to a giant Technical Negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. For now, this won't be a concern until more breadth divergence starts to happen on daily/weekly charts and we remain in the seasonally bullish month of April, which has been higher 12 of the last 13 years. Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains in April before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioration and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.






10 of the most important Charts heading into this week, covering indices, sectors and ETFs

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S&P Futures- Overnight losses have caused move down to new multi-week lows. While somewhat severe to see losses around 2% overnight, the real key will be whether futures can regain 2901 and close above that level on Monday. For now, this trend has gone higher largely unabated for four months but yet momentum has now gotten overbought while breadth and momentum have begun to taper off lately. So the month of May will truly be important as to whether trends break, or whether S&P finally reaches 3000 and higher before topping out. It's thought that the waning in Technology in recent weeks could be a concern but is countered by Financials trying to break out, while Healthcare and Industrials have both been shaping up. Thus, trade fears are likely to prove temporary to markets and Advance/Decline for "All stocks" remains at record highs. To have real concern, we'll need to see more deterioration in daily and weekly trends. While failing to recoup Sunday's weakness suggests this might be starting, we'll need to see more trend damage in absence of that, then pullbacks should prove buyable.

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TNX- US 10Yr. Treasury Yields Bearish break of one-month trend suggests additional downside for Yields - Last week saw a breakdown in the trend for yields which had been slowly showing a rebound at work in Yields back up to 2.60%. However, yields did not get back above former yield Lows from last Spring/Summer and then the decline under this uptrend started in earnest last week. Closing down at multi-day lows after the break of this uptrend was a negative for yields, and has since followed through. The break under the mid-point of its Daily Bollinger band likely results in this testing 2.45% if not 2.40% before this stabilizes. For now, it's right to be long TLT, and avoid TBT, preferring to stay long Treasuries and in ETF's that give exposure to long Treasuries.

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Russell 2000 has begun to show some real strength on an absolute basis, and relative charts have also stabilized in IWM/SPX that bode well for Small caps in the short run. Weekly IWM charts show prices having extended gains above the highs of the last few weeks and now are at the highest levels since last October on a close. Specifically, this technical improvement looks likely to carry IWM up to challenge August highs at 173.39. While this move might take some time to complete, the bottom line message here is that Small-caps have bounced back sharply and something to favor in the near-term as an area of outperformance.

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Technology in Equal-weighted terms has started to wobble a bit in relative terms over the last couple weeks. The Equal-weighted Tech ETF v SPX has broken an uptrend from December, but thus far has shown no major evidence of any real downturn. But given the recent decline in Semi stocks and GOOGL lately, it's worth paying a close eye to Technology for any hint of this turning back lower. While Technology remains the largest sector in SPX and has been the best performing this year, this last week saw the group mid-range in performance, and this relative chart shows the slowdown in the group since 4/24 about two weeks ago. A more material breakdown in Tech into mid-May would give the Bears some additional ammunition regarding the possibility for stocks to weaken.

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Financials look to be nearing a real Make-or-Break in their relative trend vs SPX that should allow for a big improvement in relative performance if this area is exceeded. This coming week could bring about further near-term strength, as companies like Berkshire Hathaway (BRK/A), the largest component within Financials, announced a repurchase of $1.7 billion shares in 1Q and its Cash and Treasury holdings now exceed $114 billion. Overall, a relative breakout in Financials would give some real conviction to the idea of SPX being above to exceed 3000 before any stalling out, and this sector is one of the more important to keep a close eye on this coming week.

Energy looks to have completely broken down in the last week after trending sideways since early February. This relative chart of OIH vs SPX shows this sector largely not having participated at all on WTI Crude's rally in recent months. However on the first sign of a meaningful pullback in Crude, like we saw last week, the Energy sector reacted pretty violently in moving lower, with many sector ETFs like OIH showing meaningful trend violation. This suggests further underperformance in Energy, and while near-term absolute charts have gotten stretched, bounces in this group are likely to prove shorting opportunities for pullbacks in the months ahead. Unfortunately the snapback in performance for this group back in January looks to have proven remarkably short-lived and last week's trend violations make Energy bearish.

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CCI index, the Thomson Reuters Equal-weight Commodity Index, still looks to weaken a bit more over the next 1-2 weeks, but is growing closer to a key area of support marking lows in CCI since Summer 2017 when this bottomed out last, before embarking on a big rally into May 2018. Given that CCI is approaching a 1 year anniversary of last year's major peak, it's likely that prices could bottom out as we near that date in the next few weeks. Counter-trend exhaustion is within 1 week of forming on weekly charts of the CCI, and former lows which have been hit 2 addiitonal times after bottoming in June 2017, are likely to result in this slowing down in its descent. Therefore, if the Dollar starts to peak out into Mid-May, that could create a perfect scenario for CCI to bottom and for most Emerging markets and commodities to try to form a technical low and bounce. Those who like buying dips should give DBC a hard look into mid-May on any further weakness.

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Emerging Markets look to have stabilized in the last week, and ETFs like the IShares MSCI Emerging markets ETF managed to hold ongoing trendline support and make an above-average bounce off the lows. Technically this makes the trend a bit more bullish near-term and still creates an attractive risk/reward scenario given the extent of price right near important trendline support. Any violation of lows near 43.45 would be a big warning signal for declines in EEM down to test March lows. Meanwhile, getting up above $50 would allow this recent bullish bounce from December to continue, targeting $46.50 before any resistance. Overall, EEM looks attractive from a risk/reward standpoint and should be favored for further gains.ç

The excitement towards Cannabis stocks looks to be building, but the price action itself has been largely subdued over the last three months. This index called the BI Global Cannabis Competitive Peers has flattened out after a sharp rally to start the year, and will need to either breakout above recent highs near 240, or violate lows right above 200 to have faith in the near-term trend. However, given the length of the sideways churning, it looks right to monitor this space and simply follow whichever way the breakout takes it.

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Bitcoin and other Crypto-currencies look to have shown some above-average strength in recent weeks, which bodes well for further rallies in the short run, with more proof needed for intermediate-term conviction. Heading into this year, the excitement about Cryptocurrencies had nearly all vanished, despite the convictoin about the success of Blockchain. Bitcoin however, has managed to rally more than 55% off the late December lows, an area that represented nearly an exact 1 year anniversary from where Bitcoin had peaked back in late 2017. While the gains off these lows have been impressive they're just a fraction of wht was last in 2018 after the torrential run-up. Last week's close a tthe highest levels since last November is bullish however in the short run and makes a good technical case for further strength up to near 6000 before any minor stalling out. While any larger rally is likely to require some backing and filling, for now, it looks right to hold longs here yet again, with tight stops, expecting further gains are possible.

Healthcare on the Rebound, while Treasuries and US Dollar both show technical breakouts

April 29, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2886-8, 2865-7, 2836-7, 2785-9

Resistance: 2921-2, 2945-9



Summary: Heading into the final two days of April, SPX has managed to push back up to new all-time high territory along with NASDAQ Composite, and NASDAQ 100 index, a process which started last Tuesday. Most of the reasons for market uncertainty have proven to be largely unfounded thus far heading into the end of April, and indices are set to record monthly gains of greater than 2%, helping April's normal bullish seasonality remain true to form. In all likelihood this will be the fourth straight month of gains and Year-to-Date performance has proven to be stellar, higher by over 17.25% for SPX through 4/26/19, more than recouping the losses seen late last year. While non-technical reasons like Earnings success are being touted as reasons for this year's gains, most of the rally has occurred within a very defensive backdrop in sentiment after some major De-risking over the last few months, which still largely looks to be in place.



The biggest technical developments last week, however, occurred not with Stocks, but with Bonds and the US Dollar. We saw a big breakout in the Dollar vs Pound and Euro, while US Treasury yields turned down sharply, largely following what had begun to happen in Europe last week. These need to be watched carefully and particularly the Rate move, given that historically when stocks and bonds start to trend together after large periods of the opposite, it can lead to a change in trend, particularly when coinciding with near-term overbought conditions in equities when sectors begin to implode one by one. Bottom line, last week's rally in both Treasuries and Dollar looks to continue near-term.



Interestingly enough, this last month has proven to be very different than the first three with regards to market health, despite April's gains. While structurally indices have been pushing back to highs, various sectors have been all "taken out to the woodshed" one by one and have made it a bit tougher to make money, despite SPX set to close higher by more than 3% for the month of April. Declines in sectors like Semiconductors last week (INTC) along with Industrials (MMM) and Energy proved to have little to no effect on broader index movement, but Technology has started to tail off a bit as a sector in the last week. If this continues and this sector begins to weaken, that would certainly be something to note that could coincide with markets starting to weaken. Treasuries have begun to rally sharply again, and this also is something not to take lightly. Until proper evidence of stocks breaking the uptrend from late December begins to materialize, it's right to still favor that this market has the potential to push up a bit more. 



Finally, the subject of this week's report centers on highlighting some key charts within the Healthcare space. This group looks to be turning higher in the short run and looks to continue, and as the 2nd largest sector within SPX, near-term bullish technicals are present in XLV along with XHS and the DRG index. Following one of the biggest cases of mean reversion this year, last year's outperformer, Healthcare, is now this years worst performing sector. However, the group was last week's best performer, and we've seen some meaningful snapback in some of the hardest hit groups, like Healthcare Services( more on this below)







Key Conviction ideas heading into this week



Healthcare is likely to outperform in the short run, and very well could have begun a larger rally to kick off the seasonal strength that is prevalent during this time. XLV should be favored for more strength and specifically, sub-sectors like Healthcare Services (XHS ) and Pharmaceuticals (DRG index) could outperform and should be overweighted.



Treasuries should extend last week's gains, and TLT and other ETF's like TMF, TMV should be favored for gains with yield targets on the 10-Year near 2.45, then 2.40%. Last week's breakdown in the 10-Year Treasury yield looked important in following European yields and looks likely to continue near-term.



The US Dollar's breakout also looked important technically, exceeding a multi-month downtrend, and should result in further weakness in EURUSD and GBPUSD. One should look to sell Euro and Pound Sterling, thinking both of these move lower this coming week. Dollar/Yen is not as convincing.



Gold's move back up above 1280 is a positive development, favoring near-term Bullish lean in Gold, expecting movement back to 1330-40. Movement over 1370 is needed for an intermediate-term bullish stance.



WTI Crude's decline warrants buying into this initial pullback as part of its existing uptrend. However, the extent of the momentum downturn as a result of Crude's weakness could be important in causing a May top and pullback in the month of May. Tactically, it's right to buy into Crude and Crude ETFs' this coming week on any further weakness, with the thought of selling into gains on any move back higher to test recent highs



DJ Transportation Average late week pullback last week should prove buyable, technically, and it's right to own IYT and also XLI on this recent pullback, expecting a bounce this coming week. 




MSCI World index has not moved as sharply higher as SPX and other US indices and shows that globally, most stock indices remain under levels hit back last September, and also under last January's peak (which happened amidst very overbought conditions.) The current trend looks likely to test prior highs in the next few weeks without too much trouble, but this level very well could be important in causing some slowdown to the current move globally. We've already seen some signs of China starting to waver a bit in the last week, which looks to be continuing this week. So, while many have an SPX focus, it's' proper to keep in mind the price action of global indices like MXWO which peaked exactly where SPX did back in January 2018 along with September, for clues as to US markets and what might be in store. 




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish over 2877, Bearish Under on a close- Still right to have a positive stance, as indices have been able to push higher despite sectors like Industrials, Energy and parts of Technology (Semis) starting to weaken. Sectors like Healthcare, the 2nd largest sector by Percentage, have been able to rally back and participate enough to buoy the market during this time, and it's thought that 2945-50 likely is challenged this week in SPX cash before any stalling out. Movement above 2950 points to 3040-75 before any reversal, while under 2889, and 2877 are both meaningful in SPX cash as support to keep an eye on.




Intermediate-term (3-5 months)- Bullish- The nearterm weekly momentum remains positive for SPX and not overbought after S&P completed the best quarter of performance since 1998. While XLK, XLY and XLI were all up near former peaks, it will be right to follow prices should they get above, until some evidence of weakness arises. The one "Elephant in the Room" with regards to a giant Technical Negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. For now, this won't be a concern until more breadth divergence starts to happen on daily/weekly charts and we remain in the seasonally bullish month of April, which has been higher 12 of the last 13 years. Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains in April before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioration and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.





10 of the most important Charts heading into this week, including Healthcare focus

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SPX - Close at weekly highs with lack of any deterioration keeps trend bullish- Movement back to new highs in SPX joins the NASDAQ, while DJIA remains nearly 300 points below, thanks in part to the poor performance of many Industrials last week. (MMM, FDX, UPS) No counter-trend exhaustion is in place, and trends still don't show any weakness with last Friday's late strength carrying price back to new highs. The area at 2945-50 has importance for S&P into the first part of May, but over this level would suggest a move up to 3040-75 before this move stalls out and reverses.

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TNX- US 10Yr. Treasury Yields Bearish break of one-month trend suggests additional downside for Yields - Last week saw a breakdown in the trend for yields which had been slowly showing a rebound at work in Yields back up to 2.60%. However, yields did not get back above former yield Lows from last Spring/Summer and then the decline under this uptrend started in earnest last week. Closing down at multi-day lows after the break of this uptrend was a negative for yields, and has since followed through. The break under the mid-point of its Daily Bollinger band likely results in this testing 2.45% if not 2.40% before this stabilizes. For now, it's right to be long TLT, and avoid TBT, preferring to stay long Treasuries and in ETF's that give exposure to long Treasuries.

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Dollar upswing might prove temporary, but for now, last week's breakout important and a minor positive Last week's breakout in the Dollar vs major Currencies like Pound Sterling and Euro looks important, and should lead to further USD strength into mid-May before any real turn. This larger pattern was thought to be negative given the choppy consolidation in the last couple months after the decline from last November. Yet, last week's breakout does make this a bit more constructive in the near-term and will need to be reversed and get back down under the area of the breakout. This is thought to be a negative for most Emerging markets, including China, which has started to turn lower in recent days. Some of the Materials breakout lately has been given back, but due to yields also turning down, the net effect has still been largely positive for the Metals.

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Crude oil downturn last week could prove important - Last week's decline in Crude looks important in the short run, undercutting the lows of the last couple weeks and a one-month uptrend from late March. While the larger trend arguably is still intact, this decline could take a toll on momentum and prove to be important and negative as Crude gets into May. Near-term, one would look to buy into this recent decline on any further weakness, expecting a decent snapback to test highs, even if Crude has begun to peak out. Most declines take time to develop, and in this case is certainly no different. No counter-trend exhaustion is yet present, and it's difficult making a case for any kind of top based on just minor weakness. Yet, the momentum downshift looks important, and will be important to see stabilization and a turn back to highs sooner than later to have confidence that this move can continue. 

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Gold- Move back up above 1280 looks important and structurally bullish in the near-term. Move above 1300 would add to the bullish case for an impending rally back to 1360-70. This latter level is considered important in marking the highs of an intermediate-term bullish base in Gold, and getting above 1370 would argue that the next bull market in Gold is underway. Near-term, the ability of prices to have recouped 1280 warrants giving longs serious consideration, and buying in small size, planning on adding above 1300.

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VIX- Some interesting resilience in the CBOE Volatility index lately as "vol" managed to hold above the highs of the last two weeks, regardless of indices having closed back at new highs. It's thought that this divergence likely should lead to some degree of snapback sometime in the month of May. However, thus far, no ability to close above the prior week's highs, which will be important, and counter-trend exhaustion thus far is premature. The divergence, for now, is key to observe, with higher implied volatility, despite higher prices.

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AAII, the American Association of Individual Investors sentiment poll, has shown two straight weeks of bullish sentiment dropping, despite prices moving higher. The spread between Bulls and bears is just 13.5% as of last Thursday, 4/25/19, and likely means that any correction that happens in May should prove short-lived, given a relative lack of enthusiasm for this rally. The Equity outflows and BaML Global Fund Managers poll has been highlighted in recent weeks given the pessimism shown towards equities while "Cash" has been a big overweight. Until this poll widens back out above 20% bullish, it's seen as indicating a bit of a guarded stance. 


Healthcare vs SPX- The snapback rally in Healthcare is very much underway, just at a time when this group normally enters a time of bullish seasonality. Healthcare has been the worst performing group of the year, but the recent stabilization in Healthcare Services and Pharmaceutical stocks is thought to be important, while Biotech will require a bit more to have confidence of a larger bounce. The chart shown above is of the S&P 500 Healthcare sector vs SPX, and the relative downtrend took a steeper more capitulatory turn earlier this year before bottoming out a few weeks ago. Given that this got so stretched to the downside, a snapback rebound was expected to be near and now looks to be underway. To have confidence of a larger rally in this group, the sector strength would need to be sufficient to break this larger downtrend on the chart above. This is very much premature, but would be meaningful when/if this occurs. For now, technicals call for a short-term continuation of this recent relative strength.


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Healthcare ETF (XLV-$89.01) Healthcare continues to show signs of rebounding, and the XLV ETF should be able to carry higher this week to 89.80 and then 91.50-92 without too much trouble. This latter area at 92 will be important to exceed to have confidence of a larger rally in the group getting underway as this would represent a true technical positive from a structural perspective. For now, sufficient strength has been seen in the near-term to just weigh in a bit more positive on the rally this week, and it's' right to be long.

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Healthcare Services ETF (XHS) - This looks to be a very positive and significant development in XHS last week and Services should be overweighted. XHS has managed to exceed the entire downtrend from February highs last Friday which is thought to be significant and bullish. The act of surpassing this trend which had already been tested twice and held should now allow for this downtrodden sector to push higher and outperform in the weeks ahead. Movement back up to 70 cannot be ruled out and one should use minor dips Monday as a chance to buy.

10 Technically attractive stocks to own after recent breakouts

April 22, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2886-8, 2865-7, 2836-7, 2785-9

Resistance: 2921-2, 2945-9



Summary: With just one more full week left in the month of April, S&P 500 has returned 2.49% through 4/18/19, a respectable gain for the month on the heels of an already stellar quarter. April of course, has been historically a very bullish month for the market (up 12 of the last 13 years) and despite some evidence of a bit of a slowdown in price along with breadth and momentum, this hasn't translated into any weakness thus far. Stocks have still largely shrugged off many of the issues thought to be important in causing at least a minor stallout in the month of April, both from a fundamental and from a technical perspective. With regards to the Technicals, outside of the breadth and momentum slowdown, counter-trend indicators have not proven correct thus far on daily charts in causing any type of reversal based on Demark's exhaustion indicators. Moreover, while sentiment has indeed finally begun to widen out a bit from a bullish perspective, it's taken quite a while to reverse course after $148 billion of Equities was liquidated near last December's lows. The exodus out of stocks early this year has proven important to monitor. Bank of America Merrill Lynch strategists tracking of fund data shows a 90.7 billion outflow out of stocks thus far YTD, (-126.2 billion outflow from mutual funds offset by +35.4 Billion into Exchange traded funds- Barron's) However, bottom line: Trends have remained positive since early January and truly are the most significant factor to keep an eye on with regards to the prospects for a market continuation vs reversal. Until proper evidence of stocks breaking the uptrend from late December begins to materialize, it's right to still favor that this market has the potential to push up a bit more. We'll cover some of the issues below that seem important and positive, but for now, it's still right to avoid getting too defensive until price indicates that it is time. With regards to Treasuries, there hasn't been sufficient rally in yields to argue for a breakout of last year's downtrend. Markets looked to be close as of mid last week, but much of this was given back into last Thursday. Commodities have softened in recent weeks, while the US Dollar manage to finish the week in a pretty constructive manner. These latter groups will merit some discussion once more meaningful technical progress has transpired to indicate a change in trend. For now, The Dollar and commodities have remained largely range-bound, while bonds are still trending higher.



Key Developments over the last week:



Consumer Discretionary and Technology ETFs (XLY, XLK) both moved back to new all-time high territory last week, while Industrials pushed up to new highs for 2019, helped by Transportation stocks



Financials showed very impressive performance and achieved a minor breakout relative to the SPX, which bodes well for additional follow-through near-term. S&P Financials were the second best performing sector last week



DJ Transportation Average confirmed the DJIA's move above February highs last week, which is encouraging from a Dow Theory perspective whereas this had been diverging for most of March.



Defensive groups like Utilities and REITS were some of the worst performing groups last week, while Consumer Staples has fared relatively better.



Healthcare's decline was sharp enough to cause this sector to turn negative on the year, after a very good 2018. Healthcare Services stocks have gotten very oversold, yet patterns remain negative and early to buy dips.



NASDAQ 100 index moved back to new all-time highs. This is a bullish development near-term, and other indices like NASDAQ Composite, DJIA, SPX remain within striking distance.



Europe has begun to outperform US near-term, with breakouts in SXXP, SX5E and the German DAX to mirror some of the positive technical developments which happened in the US two months ago. Near-term strength likely in Europe, with SX5E expected to rise to 3600 while DAX has technical targets at 12500 up to 12750 in the short run



Gold broke down under 1280, an important short-term level representing both March and April 2019 lows. Additional weakness here looks possible until 1280 can be recouped.



Natural Gas failed in its bounce attempt and plummeted back down under recent lows, violating the entire intermediate-term uptrend from last Summer. This was a real negative early in the week. While oversold here, more is needed before trying to buy here again.



WTI Crude has slowed its pace of ascent but still looks to push a bit higher into early May before any peak. The near-term range-bound pattern in Crude over the last two weeks does not look like a negative, but something which requires a final push higher before this tops out.



US Dollar index took a very meaningful step higher with last week's close up at 1197 in the Bloomberg Dollar index, above the highs of the last seven trading days. Movement up above 1205 would be meaningful and positive for the Dollar near-term (Equates to 97.71 in DXY)

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Performance-wise, we see that Industrials, Financials and Tech all led performance last week, each group up more than 2%. Meanwhile, Utilities and Real Estate both lagged. Healthcare of course showed some very sharp underperformance, but is growing very stretched to the downside and the 1 sector which is now negative for the year after last weeks underperformance. Overall, this kind of sector participation remains more bullish than bearish with XLY and XLK back at new all-time highs.




This week's report focuses on 10 technically attractive stocks that have just shown recent breakouts. While markets have begun to demonstrate some minor momentum slowdown in recent weeks, there hasn't been sufficient deterioration price wise, and these stocks have all managed to clear multi-week and in some cases, multi-month highs which make them attractive for further gains. In the event that US equities do stallout upon entering May, any market selloff likely should create a much more bullish situation from a risk/reward perspective to buy these names, technically speaking.




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish over 2877, Bearish Under on a close- It's thought that the breakouts in XLK, XLY and XLI in the last 2 weeks are a more positive than negative development, and despite some minor breadth and momentum slowdown, we haven't seen the rolling over in price near-term that would shift the trend to more negative. Under last Thursday's lows of 2889 is the first warning, and then undercutting 2877-8 would lead to a more meaningful correction. Upside comes in near 2945-50 and above there is not much until former highs which if challenged, should not give too much resistance this time around, with targets up near 3040-75.




Intermediate-term (3-5 months)- Bullish- The nearterm weekly momentum remains positive for SPX and not overbought after S&P completed the best quarter of performance since 1998. While XLK, XLY and XLI were all up near former peaks, it will be right to follow prices should they get above, until some evidence of weakness arises. The one "Elephant in the Room" with regards to a giant Technical Negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. For now, this won't be a concern until more breadth divergence starts to happen on daily/weekly charts and we remain in the seasonally bullish month of April, which has been higher 12 of the last 13 years. Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains in April before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioration and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.







10 recent technical breakouts that still look appealing to own and buy dips

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Oshkosh Corp (OSK- $82.04) Bullish on OSK's ability to have gotten back over February highs. This should help this stock start to push up to test former highs established back in January 2018. Overall, this recent strength is part of the Transportation push that has helped the Industrials begin to show much better strength. Thus, while technically attractive here, it's worth mentioning that OSK still roughly 20% off all-time highs and has just been starting to gain momentum lately. Targets on gains lie near 90, then 96.25 before the push back up to near 100 that marked the peak next January. Dips should be bought barring a move back under 72, which would postpone the rally.

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Five Below (141.65) Bullish- FIVE has been a consistent outperformer this year, and it's recent technical breakout last week of the six-month Cup and Handle pattern bodes well for this to show further strength in the weeks and months to come. This stock peaked out with the broader market back in September of last year, so its not all that overbought here, largely due to the consolidation its gone through since last Fall. The breakout back on 4/11/19 happened on double the average volume. Since that time it has certainly accelerated higher, but shouldn't face much resistance until 150. On consolidation of this move, dips should be used to buy for additional strength in the months to come.

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Pepsico (PEP-$127.09) Bullish Last week's breakout extended back to new all-time high territory above two prior highs on above-average volume. This is a very encouraging and technically bullish development for a stock that has largely been range-bound since January of 2018. As of last Thursday's close, PEP had turned in the 7th best performance of all stocks that make up the S&P 500 Consumer Staples index (33 members) with returns of +17.75%. The pattern this has consolidated within for the last 15 months is one many would describe as a Ascending triangle pattern. They can lead to a final move higher of the advance, but in this case, looks to have just begun. The act of pushing back to new all-time highs on heavy volume though is bullish and should lead to further gains to targets near 140 at a minimum, with additional targets found at $150, found by extrapolating the distance between base to trough and projecting higher. Any pullback down under $125 would create an even better risk/reward.

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Paylocity (PCTY-$89.07) Bullish- PCTY's stab back to new all-time highs was consolidated for a few days last week, and represents a more attractive risk/reward for buying this ahead of a push up to 100. This represents an intermediate-term Cup and Handle with a lengthy 2 month base. The breakout thus far failed to hold on a daily basis, but should be forthcoming given the stock's push up to just under $94. Now it's pullback to just under 90 makes this a good time to consider buying dips for the move back to new highs. Weekly momentum has turned back positive after having been neutral for the greater part of the last couple months. Overbought conditions are largely nowhere to be found on weekly charts as well given the degree of sideways activity this has shown since February. Thus, an appealing name to consider given its breakout attempt as part of the larger structure.

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Wendy's (WEN- 18.90) Bullish- WEN has just exceeded the highs of a structure which has been largely range-bound since peaking in August of 2018. This act of pushing up above the highs of this consolidation is a good sign for further progress, and it's right to own WEN technically here on this breakout with upside targets initially near $22 which would represent a test of all-time highs formed back in 2006. So gains likely could prove to be 10-15% or more given the recent breakout while there looks to be little to no real resistance until levels hit 13 years ago.

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Cintas (CTAS- $213.68) Bullish- The act of pushing back to new multi-week closing highs last week has helped CTAS reach the highest levels since last year. This is a positive development technically and should drive this up to test former highs near 220 and then higher. While some might argue against buying a stock that's well up above its longer-term trend, the fact that CTAS already pushed up to levels above this last year makes a retest less troublesome, as it signals that CTAS could begin to trend up at a quicker rate of ascent. At present, this maintains a very constructive pattern and CTAS should be owned technically, looking to buy any dips for a move higher to challenge and exceed highs.

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Bank of America (BAC-$30.03) Bullish- BAC has just begun to show strength after surpassing the upper border of this downtrend from early 2018. While a different kind of breakout then many shown here, this recent progress is nonetheless important and bullish, arguing for additional near-term follow-through up to challenge former highs near 32. The minor breakout in Financials relatively speaking late last week seemed important, and BAC in particular has huge importance within this sector. Overall, near-term strength looks likely, and this should be owned for further gains to challenge former highs.

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Walt Disney Co/The (DIS-$132.45) Bullish- DIS' breakout above its four-year base has managed to extend even more in the last week but still looks attractive to own for a move to 150 initially without much resistance. This stock has been highlighted a few weeks ago just prior to its big move and now the rally on very good volume still bodes well for DIS to show decent intermediate-term strength. While the move from $120 to 130+ in the last couple weeks might argue for a lesser size position for some, this still hasn't reached overbought levels and shows no counter-trend exhaustion that suggests a reversal is imminent. Breakouts like this of multi-year bases often argue for a good intermediate-term trend to own and look to buy all dips.

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Tractor Supply (TSCO-$103.09) Bullish- A very promising breakout in the last couple weeks of a pattern that had been consolidating for the better part of four years. These types of bases tend to yield acceleration when broken, and TSCO's move back to new all-time highs is a positive development worth buying into for additional upside in the weeks and months to come. While some might view a move back to new highs as something to sell into when viewing a daily chart alone, when examining the weekly structure, one can see how TSCO has literally just emerged from this intermediate-term base. Therefore, this breakout makes TSCO one of the more attractive within the Retailing space based on a risk/reward basis along vs others that have gotten extended. One would look to buy all dips barring a move back under 90 with targets near 120 as an initial level of importance.

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Fortinet (FTNT- $91.08) Bullish- The minor breakout above last September's highs followed by three days of backing and filling argue for a long bias here in thinking FTNT is in the process of breaking out above former highs. Looking at weekly charts, the huge runup into September managed to consolidate gains but failed to give back all that much of former progress. Lately, the gains since December 2018 have managed to recoup all of the weakness from last Fall, creating a bullish longer-term prognosis in the process with the challenge of prior highs. This giant base since last Fall as part of the bigger pattern makes FTNT attractive technically, arguing for another stab back at new highs in the weeks to come. Momentum has neared overbought levels, yet has not sufficiently shown divergence enough to make one avoid buying recent dips in FTNT compared to on the first breakout attempt. Overall, this looks to push up to 110-112 without too much trouble and pullbacks should be seen as buying opportunities with the exception of a move back down under 80 which would postpone the rally.

Materials outperformance looks to continue

April 15, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2886-8, 2865-7, 2836-7, 2785-9

Resistance: 2907-9, 2913-5, 2921-2, 2945-9



Summary: Stocks remain resilient as last Friday's sharp followthrough higher makes a bearish call still seem premature. By end of week, price gains back to new multi-day highs helped S&P and NASDAQ record their 3rd straight weekly gain, after being range-bound most of the week. Technology did show some evidence of stalling out, though Financials looked to have quickly made up some slack with some strong finish on Friday. So while it was thought last week could produce some consolidation to gains, this sideways action looks to have been resolved by movement higher, not lower. There remain issues with breadth not being as strong at this stage of the rally as was seen in January and February, and while it appeared like an attractive area to take profits heading into this week with many prominent sectors up near highs (XLY, XLI, XLK, which often serves as strong resistance to gains) we've yet to see this levels repel prices strongly, but Instead most sectors have begun to push above these levels. Meanwhile, Demark indicators of exhaustion have been present for the last week on SPX, NASDAQ, DJIA, on daily charts (along with a plethora of other Sector ETFs) and were thought to be important in potentially coinciding with an end to this rally in the near-term (or at a minimum, a minor 3-5 day top) However by day's end, these have not worked out yet as planned. Many might take note that when Weekly indicators are not also in alignment, getting any meaningful selloff of consequence from a daily TD signal alone often is quite difficult.



Bottom line, fading this rally looked wrong, at least for last week, and price held up a lot better than many momentum and breadth indicators had suggested. Until price turns lower, it's best to use a "BULLISH OVER 2900/BEARISH UNDER 2900" guideline and keep stops very tight on longs. The one technical rule of thumb is that it's always best to utilize PRICE action over the other factors which look importnat in bring about tops. Factors like waning in momentum, breadth, or bullish sentiment don't mean too much if prices have not violated at least minor trendlines and started to make new multi-day low closes. This in fact did not happen, and yet again when picking a spot to try to sell into this based on very real technical concerns, the market just didn't seem ready.



Negatives:

Last week we listed some important factors which were thought to be "Concerns" on the equity rally Most of these remain important, such as



1) Negative momentum divergence (compared to Feb/March)

2) Breadth concerns (Summation index at lower levels than Feb peaks)

3) Leading Sectors for 2019 performance now up to prior highs (XLK, XLI, XLY) Often this represents strong resistance to gains

4) 20% rally into a seasonally heading into a difficult six month stretch of seasonality



Some new concerns have to be added, such as"

5) Sentiment now showing a wider spread of Bulls vs Bears (Up to 20% on AAII, joining the already wide Investors Intelligence data)

6) VIX down at lowest since last October, near 12, showing very low implied volatility in an environment where the FOMC has decided to table all further 2019 rate hikes and a probability of 47.6% of a CUT by 1/29/2020



Positives:



With regards to bullish factors, most of what we listed last week are also still in place and definitely positives to lean on.



1) April seasonality normally is robust. We've seen gains in the S&P 12 out of the last 13 years, and has averaged +1.7% since 1999.



2) Advance/Decline for "All stocks" still at new all-time highs, so despite some waning in gauges like the Summation index since February, the actual "All-Stocks" Advance decline has shown little to no real deterioration



4) Technology still showing strength, and despite XLK being up near prior highs, we saw Tech turn in the 3rd best performance figures of the week out of the 11. So despite thinking Tech should stall out, there still hasn't been hardly any real deterioration.



5) Lack of broader market Technical damage. After our YTD Rally now has added over 20% for NASDAQ and 15.98% for SPX through 4/12/19, many indices are within striking distance of all-time highs again, rapidly closing in on September/October highs.



6) Momentum is positive and not overbought on daily, nor weekly timeframes. RSI is mid-range, while MACD is positively sloped on both timeframes



7) Seasonality is bullish in this Pre-Election year stretch, and cyclically this decennial "9th" year of a decade is one of the more positive, third to the 5th and 8th years.



8) Financials were the best performing group last week of the major S&P GICS Level 1 groups. While Yields are still in downtrends and the yield curve has not begun to rise meaningfully, the price action in the Financials has been impressive of late and important given a 13% weighting in SPX.

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S&P remains trending higher with prices finally reaching levels that can be considered near-term overbought. Within 2 trading sessions, we'll see the completion of daily Demark exhaustion in all likelihood while 3 different outperforming sectors are all closing in on former important highs that likely cause this to stall out. Overall, the next 2 weeks have the highest likelihood to causing a trend reversal and could be in place by Tuesday/Wednesday. However, given the ongoing trend and momentum, any pullback likely will find support near 2785 in extreme cases, around 100 S&P points lower, before pushing back up and eventually challenging last September's highs.

This week's report focuses on the Materials group, which has gradually begun to show better and better Technical strength following the DowDuPont/Dow Spinoff last month. Most of the Chemical and Packaging/Container stocks have rallied sharply and now the Metals space seems have gotten a jumpstart with the recent Dollar decline. We'll list a few of the key charts to focus on from an absolute and relative perspective and then drill down to some of the more important patterns that could have relevance in this coming week from within the broader Equity space along with Treasuries, commodities and FX.


SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish over 2900, Bearish Under- Despite a few short-term technical worries with regards to breadth and momentum, we still haven't seen the rolling over in price near-term that would shift the trend to more negative. While upside was thought to be minimal, taking a stand against S&P and NASDAQ as of last week proved to be wrong. Given that markets have rallied sharply since December 2018 and prices were up against prior highs, this seemed like a good opportunity to take some profits heading into last week. In many things, this was certainly prudent. However, with S&P, there still hasn't been the weakness sufficient to break the uptrend and weaken enough to turn short-term trends down. Note, many of these concerns are still intact, but it's necessary to put many of these on the back burner until price can weaken. If this happens in the next few days, then it will be prudent to mention and discuss. For now, on a very short-term basis, under 2900 is the first warning, and then undercutting 2877-8 would lead to a more meaningful correction. Upside comes in near 2945-50 and above there is not much until former highs which if challenged, should not give too much resistance this time around, with targets up near 3040-75.




Intermediate-term (3-5 months)- Bullish- The nearterm weekly momentum remains positive for SPX and not overbought after S&P completed the best quarter of performance since 1998. While XLK, XLY and XLI were all up near former peaks, it will be right to follow prices should they get above, until some evidence of weakness arises. The one "Elephant in the Room" with regards to a giant Technical Negative remains Monthly momentum which is negatively sloped and at far lower levels than last Sept/October when looking at RSI, and even on this market bounce, this did not push back to highs. For now, this won't be a concern until more breadth divergence starts to happen on daily/weekly charts and we remain in the seasonally bullish month of April. Historically when 1Q has been higher by greater than 10% over the last 50 years, it has added to those gains into year-end 9 out of the last 10 times with a median gain of 8% (Ryan Detrick) Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains in April before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioration and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.


Key Materials charts of importance, along with other important index and sector charts for the week

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Materials breakout (XLB) now following through - Materials are suddenly beginning to show much better technical structure in recent weeks after a lengthy period of consolidation from last Fall. We've seen XLB prices jump higher to break out of the intermediate-term base at work which very much resembles a bullish reversal pattern with Neckline resistance near $56. (See chart above ) Moreover, XLB has also exceeded the entire trend from last year which started a couple months ago. Near-term targets lie at 60-61 for XLB but on any weakness, this should be used to buy dips.

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Materials relative chart v SPX shows longer-term trend breakout- When graphed in relative terms, we see XLB/SPX having exceeded the entire trend from last year. Much of this strength began after DOW joined the Dow Jones Industrial Average following the DowDuPoint spinoff, but proved to be a factors that precipitated further strength in most of the groups within Materials: Chemicals, Building construction, Paper, packaging and containers, and the Metals space. With the US Dollar starting to show increasingly more evidence that a a move lower should happen, not higher, this bodes well for many commodity names that should help to provide good performance for 2019

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Freeport McMoRan (FCX- $13.70) Bullish, and further gains look likely in FCX which could reach $14.92 initially and then $16.18 as first targets on this latest runup. This stock has gradually begun to show more and more strength in recent weeks. Its breakout above the 1 year downtrend two weeks ago was thought to be a very encouraging sign and last week FCX made its highest weekly close of the year, closing up near last October's price levels. As the daily chart shows above, FCX fell over 50% from this time last year when it peaked out near $19.70 in April 2018. However, it managed to stabilize and turn higher along with most of the market and has gradually begun to produce a pattern of higher lows off the bottom. The Specific reason for appeal here though lies with two reasons: First, the recent bullish base that has seen February highs exceeded and then the longer-term downtrend from January 2018 peaks. Both are bullish developments and along with a gradual recovery in the price of Copper itself, which FCX tends to be highly associated with, these factors should help this stock's momentum continue.

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Avery Dennison (AVY-$116.31) Bullish with recent strength likely to carry AVY up to former highs near $123.60 before any resistance. This specialty Chemicals company has turned in some of the best performance among all of the Chemicals group. It's higher by 29.48% YTD, making this the 3rd best performing stock within the Materials ETF, XLB that tracks the Materials sector. Specifically in this case, the gains have broken the downtrend from last year while not having carried AVY to extraordinarily overbought levels. Counter-trend exhaustion is premature, while the ongoing momentum remains strong. Targets initially should arrive near former all-time high peaks which is the first target to look for on this recent rally. Until/unless the trend from December 2018 is broken (which now is still quite premature) , it's right to stick with this and buy AVY as one of the stronger names in the business whose rally doesn't look complete.

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FMC Corp (FMC- $79.97) Attractive, and strength to technical targets near $90 look possible on a breakout of FMC's recent base. Unlike the prior names listed, FMC looks attractive given the stock's potential to break out of the 6 month consolidation range which has kept this stock range-bound since last October. This Agricultural Chemical company had seen its stock triple in the run-up to highs from 2015, and this recent base now looks to be giving way which should allow this rally to continue. The first week of April's close of $80.42 managed to finish at the highest levels since last January, exceeding three prior peaks in the process. Thus, FMC's near-term strength out of this base makes this an attractive stock to consider for the possibility of further gains as part of this larger pattern.

Vulcan Materials (VMC- $122.15) Bullish and its move back up above the downtrend from last year bodes well for further gains up to $130 and then $140 before any real resistance. Technically speaking the act of getting back up above former lows that had held on multiple occasions was the first positive sign, and often results in short-covering and technical buying as the breakdown into this spring looked like a false move. Then this was followed by the break of the actual downtrend. The combination of these technically is thought to be very encouraging for the prospects of further gains. Strength higher to test former highs near $140 is a very real possibility and the first area of real resistance where it's right to sell into gains. Overall, VMC should be owned here in small size with any minor dips being used to add to longs.


Financials ETF- (XLF-$27.14) Near-term bullish and movement OVER 28 would help drive a larger rally. Apart from the Materials focus, it's also important to keep a close eye on what's happening to the Financials sector which has vital importance to the broader equity market, with a 13% weight in SPX. This group had lagged badly over the first few months of this year. However, it's jump last week successfully carried prices to the highest levels of the year and should help XLF push higher initially to areas near $28 which marks a larger intermediate-term trend. Bottom line, in the near-term, this move looks important and positive and should help this group make further near-term progress.


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Pound Sterling v US- GBPUSD- Near-term churning nears breakout as range narrows- Given all the focus on BREXIT these days, we see that the Pound has been slowly consolidating gains within its bounce from last December. The last 7 weeks have been largely neutral/range-bound, but the highs and lows have shown some signs of constricting lately which should give way to an upcoming breakout in the weeks ahead. Overall, the bias is for higher prices given the ongoing four month trend, but we'll need to see movement back up over 1.3167 before pressing bullish bets. This would drive GBPUSD up to test March highs at 1.3381 and likely carry over this level up to 1.36 which is the larger intermediate-term line in the sand from the 2014 highs. On the downside, it's important to watch for any failure of 1.2987 which would postpone the advance


Sentiment has started to grow more bullish, and finally some might say after a 15% + rally off the lows. While formerly we saw Investors Intelligence show over a 20% spread between bulls and bears, the AAII data (American Association of Individual Investors) had remained subdued, with just a small spread between bulls and bears. Last week was thought to be one of the first weeks where this sentiment poll also jumped and showed more than 20% Spread now to mirror what's being seen in Investors intelligence. Thus now we're seeing bulls start to grow which should be a concern from a contrarian perspective.


Smooth breadth gauges like McClellan's Summation index have bounced in the last couple weeks, but still lower than late February. Many discuss Advance/Decline back at new highs in the last couple months as a sign that breadth has been very good, and that's very much true. However, when looking at the Summation index, we see that most of this strength happened in January and early February, while since then, the further attempts at pushing higher in March largely happened with much lower breadth. To put this in perspective, many groups like Financials and also the Small cap arena suffered throughout March and these are important to highlight as areas that have been much weaker through this rally. At present, this has turned up in recent weeks again, but the market breadth at current juncture still looks weaker than what was seen 2-3 months ago. This should be monitored carefully for any evidence of this turning back lower.

Top Technical Shorts to consider after this Run-up

April 8, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2886-8, 2865-7, 2836-7, 2785-9

Resistance: 2899-2901, 2907-9, 2921-2



Summary:  Equity trends remain steadfastly bullish but are now getting stretched, and have arrived at near-term areas where resistance could set in, as early as this week on a very short-term basis. Momentum is nearing overbought territory yet again after one of the best quarters in over 20 years time, while the groups that have led this rally, namely Technology, Consumer Discretionary and Industrials, are now up to levels near prior highs which are thought to be important from a price perspective. While the overall momentum and breadth of this rally from late December 2018 along with ongoing trend remain impressive, markets likely can take a small breather after recent 23% gains from December lows before continuing higher to challenge all-time highs. Given no discernible evidence of any trend damage, it's tough making a larger call for any sort of market peak. However, factors like divergences, upside exhaustion, cycles and sentiment can all be useful in pinpointing areas that are sub-optimal for new long positions, and result in short-term turns, to the downside as well the upside. Some of these concerns will be shared below, and the overall thesis remains that this intermediate-term trend does not look complete, and any dips in the next 2-3 weeks likely turn out to be buying opportunities for a rally to exceed last September highs. Outside of Equities, we have seen some attempts in Treasury yields bouncing in the last week as part of an ongoing decline in yields that got underway back in December of last year, continuing lower this past March. Meanwhile the Dollar index has largely been unchanged most of the year, having closed last Friday at the same number, 1198, where it ended 2018.. 1198.22 on 12/28/2018 in the Bloomberg Dollar index, vs 1198.24 last Friday, 4/5/2019. Thus, despite all the BREXIT worry and minor bounce in Pound vs USD, the broader US Dollar has been quite range-bound thus far for most of 2019. Below i'll discuss some of the concerns about the Equity market at this stage and then review some of my top picks for Technical shorts for the weeks ahead.



Near-term Concerns on this Equity rally:


1) Negative momentum divergence- Gauges of momentum like RSI (Relative strength index) peaked out in late February when SPX was at 2813. Now 80 points higher, RSI has been unable to move back to new high territory. Monthly negative divergence is very prominent, but is more of an intermediate-term concern for next year, not 2019.


2) Former tops are now being challenged in ETFs of sectors like Consumer Discretionary, Technology, Industrials (February highs) Financials (March highs), with 3 of the 4 of these sectors being the top performing thus far of 2019. At a minimum, this should cause some slowdown to this move and has the potential for a mild reversal.

3) Demark indicators as a means for upside exhaustion are now being seen (Or will be present most likely by Tuesday) on Daily charts in NASDAQ Composite, DJIA, SPX, RTY, RIY, NKY, MID, NYA, SHCOMP, SXXE, SX5E, DAX, UKX, AS51, DWCF. (The VIX, meanwhile, has the same but opposite signals (nearing a BUY) which will be complete in the next 1-2 days potentially. Note, given that the weekly signals are still very premature and non-existent at this time, I anticipate this means that any selloff proves minor for now.

4) Recently breadth gauges like McClellan's Summation index, which is a smoothed version of McClellan Oscillator, peaked out in late February. So while the Advance/Decline did move back to new highs, the smoothed gauge of breadth has begun to weaken.


5) SPX and other US indices are up 15-20% YTD thus far and within three weeks of entering May, the typical start of a slowdown in performance. While trends and momentum remain bullish near-term, it's doubtful that the next 3-6 months bring about an equal degree of rally as has been seen since December. Thus, the majority of gains for this year very well could be in place. While near-term trends are now bullish, it makes sense to consider taking profits on stocks nearing former highs and being far more selective at this stage of the rally.




Positives: Reasons for encouragement this year and/or into the Fall

1) Markets have just completed the best quarter of performance since 1998 (SPX) and now are in one of the seasonally strongest months of the year. April has shown gains for the S&P 12 out of the last 13 years and has averaged 1.7% for the month since 1999. Thus any minor pullback likely could still lead to late month strength.


2) Advance/Decline for "All stocks" still at new all-time highs, so despite some waning in gauges like the Summation index since February, the actual "All-Stocks" Advance decline has shown little to no real deterioration


3) Sentiment gauges such as AAII are still only showing readings of +6.75 spread between Bulls and Bears ( the American Association of Individual investors) While other data like Investors Intelligence and DSI data shows more bullishness, the lack of this poll confirming the others is a concern. Also as mentioned last week the BofAML Global Fund Manager survey for March 2019 showed Equities as the biggest underweight and Cash as the biggest overweight


4) Technology has still not really shown much deterioration and just a stalling out at this time. At 21% of the SPX, this is meaningful relative strength from this top sector.


5) Lack of deterioration. Structurally, S&P managed to get back up above former key support that was broken and exceeded meaningful trendlines from last Fall, now trading just 3.5% below All-time highs.


6) Momentum is positive and not overbought on daily, nor weekly timeframes. RSI is mid-range, while MACD is positively sloped on both timeframes

7) Seasonality is bullish in this Pre-Election year stretch, and cyclically this decennial "9th" year of a decade is one of the more positive, third to the 5th and 8th years.


8) Defensive leadership has begun to wane in the last couple weeks, with signs of Consumer Staples breaking down and both Staples and Utilities were lower last week, which would seem to be a positive for Risk assets.


9) Financials outperformed last week , showing 3.3% returns for the week as Treasury yields bounced. While yields remain under pressure and still trending down, this relative strength in Financials is seen as helpful at a time when Technology could stall.

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S&P remains trending higher with prices finally reaching levels that can be considered near-term overbought. Within 2 trading sessions, we'll see the completion of daily Demark exhaustion in all likelihood while 3 different outperforming sectors are all closing in on former important highs that likely cause this to stall out. Overall, the next 2 weeks have the highest likelihood to causing a trend reversal and could be in place by Tuesday/Wednesday. However, given the ongoing trend and momentum, any pullback likely will find support near 2785 in extreme cases, around 100 S&P points lower, before pushing back up and eventually challenging last September's highs.


This week's report focuses on 10 names which look technically vulnerable for the weeks ahead. For those looking at shorting into this move, these stocks look attractive as technically bearish shorts. As always, it's right to utilize tight stops on shorts in the event these turn up for risk management purposes.



SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bearish- Looks like markets are very very close to levels which makes sense to take a stand in thinking this move stalls out and/or shows some minor trend reversal which could happen by Tuesday/Wednesday of this current week. While Monday and potentially Tuesday could still be positive, it's likely that 2905-2915 will have importance early in this week as resistance which could bring about a turn back lower. However, one should consider buying implied volatility and/or awaiting some type of reversal before getting too short, as the overall weekly trend remains in good shape. Thus, this is a very near-term thesis only at this time and one would look to use any pullback to test March lows near 2785 as a chance to cover shorts and/or hedges, expecting that on an intermediate-term basis, there still is more to go on the upside in the months ahead.

Intermediate-term (3-5 months)- Bullish- While monthly momentum remains negative for many indices given our weakness since September and particularly since December, the near-term trend remains positive from late December and indices have just completed the best quarter in nearly 10 years time. Historically when 1Q has been higher by greater than 10% over the last 50 years, it has added to those gains into year-end 9 out of the last 10 times with a median gain of 8% (Ryan Detrick) Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains in April before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioraiotn and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.



Attractive Technical shorts to consider after this Run-up

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CME Group Inc. (CME- $170.09) CME looks to be nearing areas to take profits on this bounce and consider shorting for a move back to new lows. Many of the Exchange stocks have been among the weakest in the Financials group in recent months, with CME being the worst performing of all 67 members that make up the S&P 500 Financials index, down -9.58% YTD. As can be seen on weekly charts the trend violation of the uptrend from 2017 alone was a real negative early this year. CME has since bounced 4% in the past two weeks, yet remains underneath both the long-term uptrend that was violated, along with a minor downtrend connecting last year's highs with the bounce attempt into early March. Counter-trend exhaustion hits likely within 2-3 days time, making 172.50-175 an excellent area to consider selling/shorting, expecting CME to pullback down to recent lows. Weekly MACD remains negative, and it's difficult getting too optimistic on CME's chances of making furhter gains given how weak momentum has been along with structure. Overall, it looks right to sell into this recent bounce, and expect CME turns back lower.

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Tilray (TLRY- $59.54) Bearish, and additional losses look likely in TLRY to areas down near $52.81 extending to $50 as a decent area of support to this decline. Overall, despite the gains being seen in many "Pot" stocks this year, TLRY has been a notable laggard. Its undercutting of late December 2018 lows on a close last week does not seem to make this more attractive to buy, but looks more likely to extend lower. Counter-trend exhaustion per Demark is premature on both daily and weekly charts, and this has been consistently weak in recent weeks despite a bounce in most of TLRY"s peer stocks. Bottom line, this still looks early to buy, and is a better near-term short than long, technically until/unless this can get back up above $75.55 which would take a monumental effort. One should avoid buying dips and use minor rallies to sell/short, expecting TLRY likely drifts down to the low $50's which is the first meaningful area to cover shorts.

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Signet Jewelers (SIG-$26.85) SIG remains under pressure, and even with better Adjusted earnings results last week, these still failed to beat comparable year-earlier figures. The stock technically has been under a ton of pressure in the last six months, though arguably, it has begun to try to stabilize at low levels since January. Unfortunately, this treading water along the lows type pattern has failed to participate in any of the strength in this year's early rally, and now looks to be fading in the last couple days. SIG's drop to multi-day lows last Friday looked important and negative, and likely drops this back down to the January lows near $23.80. Unfortunately with a sizable net loss and continued store closings, it matters little whether the stock might "appear" cheap. Technically patterns of this sort tend to be resolved by a move down under the lows of the recent consolidation, and in this case, it looks right to bet on a move down to near $20, whic makes this still very vulnerable. Shorts should use stops on any daily close back over $29, but it honestly should require a rally back over $33 before thinking that the worst is over. Near-term, additional pullbacks look likely and it appears premature to try to buy dips. Avoid and/or short technically.

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Guess? Inc. (GES- $18.55) Bearish and despite a real boom in Retail stocks lately, GES has not participated and now looks to lose further ground given last week's decline on heavier volume. The stock has had a history of showing support right near current levels over the last year. However, the break of the intermediate-term uptrend looks to be a concern three weeks ago and the stock remains lower by over 15% from where it traded just last month. Technically I'm expecting a pullback down under $18 which would result in this likely losing further ground to near $14.50 near last Spring's lows. Until this can get back up above $19.90, this remains one to avoid buying dips and/or considering as a technical short, looking to add on any break of $18.

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Kroger (KR- $23.90) Technically weak, and last week's close at the lowest levels since this same time last year doesn't quite look complete. Additional selling looks likely in the weeks/months ahead with targets down near 2017 lows just under $20. While KR had shown some promise back last Fall with the breakout attempt of the downtrend from 2015, this showed little to no real follow-through and ended up selling off back down to undercut the two-year trend from late 2017. Bottom line, momentum is negatively sloped and not oversold and counter-trend signals of weekly exhaustion are about 2-3 weeks early to signaling any kind of low. Thus, additional weakness looks probable here, and it's right to avoid and/or short until/unless this can regain $26.50 which would be a stop for Shorts.

L Brands (LB- $27.46) Underperformance not encouraging. Look for break under recent lows. LB is yet another Retail stock which seems to be going in a different direction than most of its peers. After having lost over 35% into year end, it's bounce failed to live up to what the market has shown and this has barely gained any ground in 2019, trading range-bound along the lows. Patterns of this sort which fail to appreciate during big market moves often will prove susceptible to weakness on any signs of turn down, and thus it remains right to hold off on expecting this to join its peers, but rather to pullback and undercut recent lows. Near-term technical targets lie at $24.76-$25. Any decline down under $24.76 on a weekly close argues for a more lengthy correction which likely should hit $20 or below, reaching levels this hasn't hit in 10 years. For now, it's right to avoid and/or short, technically speaking, and look to add on a break to new monthly lows.

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Altria Group (MO- $54.77) Bearish, and last week's pullback to new multi-week lows after its 20%+ bounce from January looks to extend in the weeks/months ahead. While MO bounced from $42 to $57, this hasn't broken the downtrend over the last couple years. This bounce puts prices near a level which arguably is a very attractive risk/reward to consider shorting into. While the downtrend hits near $60, this area in the mid-50s was exactly where MO bottomed back in May of 2018. Thus, former lows often can be an attractive spot to sell gains in a stock which has reached this area. Overalll, the move down under the lows of the past few weeks should successfully jumpstart the decline back lower, particularly when Staples has begun to weaken itself as a sector, breaking meaningful trends back lower. Downside targets lie at $47.50, then $42.50 with resistance and stops to gains at $57.85.

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Owens Illinois (OI- $19.23) OI remains a technical laggard, and recent gains should be used to sell/short thinking that a pullback down to test and break December 2018 lows near $15.60 is likely. The downtrend that connects highs going back since January 2014 intersects near $21.50 and is an attractive area to consider shorting. Yet, even at current levels, OI lies around 50% of its all-time highs where this peaked out in January 2014. The stock has barely gained any ground since the market's December 2018 lows, and it looks right to avoid buying here but consider shorting for a move lower in the months ahead. Stops on shorts lie at $22.50 and any gains over that level would postpone the decline.

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Overstock.com Inc. (OSTK- $16.87) Recent deterioration in the last few weeks suggests a further downturn to test former lows before any meaningful bottom is in place. OSTK broke down in mid-March and last week's mild rally attempt failed to reclaim any area of importance which would argue that a rally is underway. Momentum remains negatively sloped, and technically it looks like an attractive risk/reward to bet on a return to $12.33 to test December 2018 lows in the months ahead. Stops on shorts should be placed near $19, with any break of $15.93 being used to press shorts for this pullback to extend another 15-20% lower.

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CBOE Global Markets Inc. (CBOE- $95.85) CBOE joins CME as being one of the weaker stocks within the Financials complex. While markets have gained ground to the tune of 15-20% in recent months, this has largely gone nowhere, treading water in neutral consolidation since late December 2018. Movement down to $90 looks likely initially, with a break of this level leading to a quick decline down to $79 which is the 50% retracement of CBOE's entire rally from 2010-2018. Stops would be placed over $99, but given the structural shape of this pattern since CBOE's peak early last year, technicals suggest a downward bias with a likely break back to the downside. Thus, it looks right to position here with thoughts of adding to shorts on a break of $90.

Additional follow-through possible this week after best quarter in nearly 10 years

April 1, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2795-6, 2780

Resistance: 2858-9, 2863-6, 2875, 2882-3



Summary:  Trends remain near-term constructive, and price action has still largely ignored some of the recent breadth and momentum weakness seen in the month of March, with S&P having just managed to complete its best Quarter in nearly 10 years' time. SPX is now just 3.2% below its all-time high from September 20, 2018. This is one of the 10 best starts to the year ever, and my colleague from LPL, Ryan Detrick, has noted that over the last 50 years, gains >10% in 1Q have gone on to show gains for the full year 9 out of the last 10 occasions, with a median return of 8%. (1987 being the lone exception) While Technology nearing resistance and counter-trend exhaustion being close should mark at least a short-term peak to this rally sometime this month and potentially as early as 4/4-5, it looks early entering this week to abandon stocks and/or hedge, and further gains still look likely. Meanwhile in the Dollar, we've seen some evidence of price turning higher in short-term fashion last week, which has served to cause commodities to turn lower and signifies that our long-awaited commodity rally is still very much premature. Meanwhile, bond yields remain a key focus as the 3mth-10 year spread has inverted, while US 10Year Treasury yields have gotten very compressed, with yields down to 2.338 before bouncing last Friday. It's thought that this strength in the Treasury market (yield weakness persists in the month ahead, and that gains to 2.47-2.52% would be an excellent time to buy Treasuries for a possible move to 2.25%.



Overall, these are thought to be some of the key positive and negatives, shown in Bullet form.



POSITIVES:



1) Advance/Decline for "All stocks" has moved back to new all-time highs in March, showing little to no evidence of any larger breadth deterioration



2) Sentiment gauges such as AAII , the American Association of Individual investors, showed a drop in its Bull/bear readings down to +6 last week, with Bulls at 33.20% and bears at 27.20%- This nearly neutral reading coincides with the data from BaML Fund Manager survey lately which shows Equities as the biggest underweight and Cash as the biggest overweight (March 2019)



3) Technology's outperformance in March caused this sector to regain the top spot for YTD returns, now showing performance of 19.37% YTD. At 20% of the SPX, this is meaningful relative strength from this top sector.



4) Lack of deterioration. Structurally, S&P managed to get back up above former key support that was broken and exceeded meaningful trendlines from last Fall, now trading just 3.5% below All-time highs.



5) Momentum is positive and not overbought on daily, nor weekly timeframes. RSI is mid-range, while MACD is positively sloped on both timeframes



6) Seasonality is bullish in this Pre-Election year stretch, and cyclically this decennial "9th" year of a decade is one of the more positive, third to the 5th and 8th years.



NEGATIVES:



1) Bond yields are certainly giving a warning of some sort about economic growth and have decoupled from equities as both bonds and stocks have been rallying in unison.



2) Momentum remains negatively sloped on a monthly basis and is showing negative divergence, probably the most bearish occurrence to happen to a long-term chart typically before a decline gets underway. Most former peaks were all preceded by meaningful negative momentum divergence



3) Technology has rallied back to near former highs, a level that looks to have some real importance in potentially causing resistance to this rally. The SOX also shows a similar chart and resistance to the S&P Information Technology index, indicating that April might show some slowdown in Tech



4) Recently breadth and momentum have softened a bit, as seen by McClellan's Summation index, which peaked out in late February. So while the Advance/Decline did move back to new highs, the smoothed gauge of breadth has begun to weaken.



5) Defensive outperformance has been prevalent for the month of March, with Real Estate, Consumer Staples and Utilities all performing better than the SPX and better than Financials, Industrials and Healthcare



6) The extent of Financials underperformance lately has been a concern given its 13% weighting in the SPX and This group along with Healthcare and industrials all turned in "down" months for March. It's thought that if none of these groups steps up this month and Tech starts to stall, further gains could prove difficult to come by.

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S&P strength in the final two days of the month and quarter has led to some early pre-market follow-through ahead of Monday's session and it's thought that given a lack of counter-trend exhaustion, a run-up to test and exceed recent peaks at 2866 is in order. It's right to stay long this week, using any minor weakness to buy dips until/unless 2785 is breached, which would postpone any further rally.




This week's report focuses on the stocks within the Retailing sector, which have started to turn in some above-average performance lately after a very poor Q4 2018. Relative charts show XRT , the ETF which tracks the Equal-weighted Retailing index, having bottomed out near former lows vs the SPX and now turning higher. Technically speaking, this group looks like one to favor in the weeks ahead, and writeups below concentrate in some of the more bullish technical names to favor. These are as follows: COLM, FL, ULTA, DECK, FIVE, TSCO, DLTR, and SFIX.






SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:

Short-term (3-5 days): Bullish- Still very little evidence of any price weakness, and while breadth and momentum have stalled a bit, the late gains last week on Thursday/Friday are likely to lead to a move to test and exceed March's 2866 peak. Cycles converge on 4/5, this coming Friday, which could bring about a near-term peak for stocks. Thus far, Demark indicators are 2-3 trading days away and structure remains bullish. Long, looking to buy dips with stops at 2785 (2789 for ES_F)

Intermediate-term (3-5 months)- Bullish- While monthly momentum remains negative for many indices given our weakness since September and particularly since December, the near-term trend remains positive from late December and indices have just completed the best quarter in nearly 10 years time. Historically when 1Q has been higher by greater than 10% over the last 50 years, it has added to those gains into year-end 9 out of the last 10 times with a median gain of 8% (Ryan Detrick) Moreover, the breadth thrust combined with bullish seasonality and lack of complacency combined with lack of Technology deterioration could lead to a bit more gains in April before any real drawdown, and it's thought that pullbacks likely prove minor. While gains at this point likely will prove less robust into Summer/Fall and offer some buying opportunities, we'll need to see some evidence of breadth deterioraiotn and more bullishness to have concern on an intermediate-term basis. After all, Advance/Decline for Equities has pushed back to new all-time high territory, and in both prior bear market peaks, we saw meaningful divergence in Advance/decline before the broader market peaked out. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.





Top Retailing longs to consider from a technical perspective

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Stitch Fix Inc. - Class A- (SFIX - $28.23) SFIX looks attractive here technically after giving back about 25% from its gap in mid-March when this surged on record volume. That 30+ million share day in mid-March caused the stock to get over $37 before pulling back in recent weeks. This area just above $28 stands out given the trend from last year connecting lows while SFIX has just made a new multi-day high close as of late last week. Gains should occur which take the stock back to the mid-$30's and to test and exceed prior highs.. Given the current structure this is an attractive risk/reward here because the downside risk is very well defined and one would look to hedge/stop out longs on any close down under $26.82.


Columbia Sportswear Co. (COLM - $104.18) Bullish- COLM's gap higher on very high volume last month has managed to consolidate in recent weeks while not losing hardly any ground. This is thought to be a very bullish development which should lead this over $107 and allow for a push up to $120 in the weeks and months ahead. The gap last month managed to clear the entire base seen in this stock since last summer which is a very encouraging development. Overall, one should position long, looking to buy minor dips with thoughts that a push higher is imminent and likely occurs on above-average volume again.

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Deckers Outdoors (DECK- $146.99) Bullish- The act of consolidating gains over the last seven weeks after a very good rally should allow for some upside followthough that allows this base to be resolved by a move higher in the weeks to come. No evidence of any counter-trend sells are present, and further gains look to happen specifically based on last week's move back to new multi-week highs on a close which can help this get to $160 before any real stalling out. Pullbacks should be used to buy dips technically as its thought that DECK should not violate the longer-term trendline in place. The recent consolidation has helped to alleviate overbought conditions, making this attractive to buy during this consolidation.

Dollar Tree Inc. (DLTR- $105.04) Bullish given the degree that this has pushed to the highest levels since last March after having exceeded a very flat bullish base over the last few months. While daily exhaustion could halt this progress near $108-110 in the short run, weekly signals are very much premature and should allow for further gains up to $116.65, near the highs that were made back in February of last year. Overall this looks bullish to buy and use minor pullbacks to add, with only a decline under $94.75 postponing this larger advance.

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Five Below ( FIVE- $124.25) FIVE looks quite positive given the mini-Cup and Handle pattern that has formed in this stock after already a very sharp rally in recent months. FIVE managed to gap higher last week when LULU rose sharply but remains better positioned technically to show further progress in the weeks ahead. It's thought that gains to challenge and exceed February highs at $133.65 should happen in the near future and it looks right to position long here technically with thoughts of adding on a weekly close over $133.65 with targets near $145-$150. Stops under $114 on a weekly close which would postpone this move.

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Foot Locker Inc (FL- $60.60) Bullish- FL has managed to consolidate its recent breakout back down to a key area to consider buying technically, as this lies right near the pivot and right above the longer-term trendline connecting 2017's lows. While this has some work to do in order to get back to all-time highs, momentum is positively sloped and upward sloping in recent months given this stock's progress. The ability of last week to close positive after three negative weeks of pullback is seen as a real positive and weekly MACD remains positive while this is still very much trending up since 2017. Overall an attractive risk/reward given this recent consolidation and stability within the uptrend.

Restaurant Brands International Inc (QSR- $65.11) QSR has formed a bullish Cup and Handle pattern in the last few weeks and prices look to be exceeding recent highs which bodes well for follow-through in the weeks ahead. This company which owns 27,000 Burger King and Tim Horton's restaurants, looks well positioned to move to $70 in the near-term technically and one should position long and buy dips barring a move back down under $62 on a daily close. Momentum is not overbought given the consolidation in the last couple months, making this more attractive from a risk/reward basis.

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Tractor Supply Co. (TSCO- $97.76) Positive for gains to $120- TSCO shows a very bullish intermediate-term Cup and Handle pattern at work for the last few years and the ability of prices to consolidate near the "neckline" of this pattern in recent months is quite constructive for this technically. While it appears that price is right up to resistance, on a weekly chart, last Friday's close managed to exceed all prior closes going back since 2015, bringing this back to new all-time highs. It's thought that a move up to 100 is likely near-term and then $120 is possible in the months ahead, as TSCO begins a more measured move after moving back to new high territory.

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Retailing starting to make progress higher after a rough few months.SPDR S&P Retailing ETF, the XRT which is designed to monitor the S&P Retail select Industry index, an equal weighted index to the Retailing sector, has gradually been showing some signs of bottoming in the last couple weeks. Prices have broken back above minor downtrends and we see a very good rebound from late last year that has now exceeded the larger downtrend from last Fall. This should bode well for XRT to strengthen further in the weeks ahead.

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Signs of rebounding as part of a bearish trend for Retailing- Retailing relative to the SPX remains in a bearish downtrend from last year, but has just reached former lows and has started to show signs of rebounding in recent weeks. Demark indicators on relative charts have triggered Weekly exhaustion and should enable this group to be able to outperform relative to the SPX in the month of April. Thus, Retailing is a tactical overweight and many of the stocks chosen are ones that are showing very good signs of technical strength and should be favored.

Fridays pullback not too meaningful price wise just yet, but likely is a "Shot across the Bow" for this 3 month rally

March 25, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com




S&P 500 Cash Index

Support: 2795-6, 2780, 2753-5, 2727-31

Resistance: 2812-3, 2826-7, 2858-9




Summary:  Trends remain bullish, though last Fridays decline was sufficient to put some "Wear and Tear" into momentum and breadth that likely should begin a topping process for the Equity market in the near-term. While this doesn't preclude Equities moving higher this week to end the month and quarter, it does mean that upside likely will prove limited in all likelihood for the month of April and we will finally see some evidence of selling pressure in April after 3 sharp months of rally. Treasuries moved sharply higher with yields now down to 2.41% in the 10year and dropping under the 3-month yield for the first time since 2007. Readers might remember this happened back in 2006 about a full year ahead of the crisis and was something to keep note of. Meanwhile the Dollar has temporarily stabilized and bounced in recent days, but Gold has managed to push higher anyhow. It's thought that Dollar strength likely proves temporary into April before turning back down, and Gold might begin to finally make a move towards the more important 1375 area of "neckline" resistance. Defensive sectors gained ground last week as Technology showed some meaningful reversal signs right near former highs.



Looking back, equities showed their first ~2% decline since the end of December as prices fell sharply with six sectors falling more than 2% and breadth finishing down around 3.5/1 negative. That's a big change from the kind of price action and sector performance we've seen lately. However, it's worth noting that given the extent of Thursday's gains, Friday only finished down around 3 points under Thursday's lows. However, with Tech having gotten to right near prior highs, it's thought that Tech likely cannot rebound too meaningfully in the weeks ahead before consolidation. What's considered a real negative, is the extent to which Treasury yields are dropping precipitously. The bond market seems to have lost any sense of confidence for US economic growth. As for positives, structure is still in OK shape, and we've seen a heck of a rally the first few months, which tend to be positive for the year historically. Additionally, sentiment is a bit subdued, and Demark Exhaustion is still EARLY to form, and will require a move back to test highs.



Overall, the base case is that last Friday was potentially a tipping point for momentum and breadth , but yet we'll see signs of prices trying to claw back this coming week to help the quarter finish out on a good note. Breadth however, is unlikely to match on the Upside what it did on the downside last Friday. Thus, we still face a troubling situation heading into April in the short run that likely means at least a minor pullback is going to begin in April. However, it's thought that this won't erase even 50% of the move up from December and should turn out to still be a buying opportunity for stocks in the months ahead. As has been mentioned, it's still likely that the brunt of any real selling could be pushed off until the Fall and certainly next year likely is setting up to be Sub-par, both technically and economically. For now, we'll use last week's Friday dip to try to buy for a push higher this week.

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S&P pulled back sharply, but this largely just erased what had been a pretty stellar move last Thursday. Prices did undercut the 10-day m.a. and as of Futures trading pre-open Monday morning have broken the uptrend from December. Bottom line, it's thought that this first pullback is buyable, but one should now look to be selling rallies over the next week on any gains. Key areas of support are found at 2796 down to 2780. Below that lies 2753-6 and then 2727 the March 8 lows. Until/unless those early March lows are violated at 2727, this pullback should be buyable in the next couple weeks. Seasonality and intermediate-term momentum remain positive, so despite some breadth falloff and price weakness, any short-term peak given the 3 month rally we've enjoyed, likely will take some time and some Backing and filling before even a meaningful short-term top.





New Technical Longs/Shorts to Consider technically for the next 2-3 weeks:



LONGS: GDX, VZ, TMUS, NEE, EXC, XLU

SHORTS; BBBY, NWL, TPR, OSTK





A more thorough stock writeup will be given once I return on some of the more appealing technical setups being seen. Note, for those on Twitter, follow me on @NewtonAdvisors where i post Long and short stocks every trading day with brief analysis. My Videos are being posted on YouTube and also on my blog at http://newtonadvisor.com/blog While my travel might prohibit these from being updated as quickly this recent week, I appreciate your patience and things should return to normal by this coming Wednesday.





SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:


Short-term (3-5 days): Looking to buy early week weakness Monday/Tuesday, thinking a final push higher is likely into end of quarter before markets experience some consolidation in April. After such a lengthy run of 3 months, it's tough to call the top based on 2 days of pullback. My thinking is that we experience some "backing and filling" and rallies into end of week are better to sell, than with S&P under 2800. So both in S&P and also in Europe in SX5E, one should look to buy this initial dip.

Intermediate-term (3-5 months)- Bullish- While monthly momentum remainsnegative for many indices given our weakness since September and particularly since December, the near-term trend remains positive from late December and the breadth thrust combined with bullish seasonality and ongoing pessimism combined with recent sector emergence (Technology and Financials breakouts) should lead equities higher into the Spring/Summer before any further rolling over happens that causes more intermediate-term damage. The latest strength over the last few weeks has now caused weekly MACD to turn positive and join the Daily momentum in moving up. Thus, it's looking increasingly less likely that an immediate retest of December lows is likely, but something of the sort certainly cannot be ruled out for September/October of this year. Structurally, as has been noted, we have seen technical improvement in US benchmark indices, with prior lows having been recouped along with downtrends from last Fall's highs being exceeded. While the average stock is now officially in a bear market, most market indices are not, and many arithmetic charts still show the uptrends for market indices to be intact. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.


The most important charts from last week

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Technology looks to be stalling after having rallied right to near the prior trendline that had been broken along with getting up right near prior highs. While a possible further retest cant be ruled out for this coming week, upside should prove limited for Technology and this shouldn't be the sector to overweight for April. It's thought that profits should be taken on most Tech names on a 2-3 week basis and rotating into Defensives makes sense, particularly on any early week rallies.

Treasuries have rallied very sharply in the last couple weeks, with yields now down under 2.45%. (TNX) This shows the markets lack of conviction in the economy to stay on track, and suggests a possible washout in Yields to near 2.25% before things stabilize. Overall, one has to keep a close eye on Treasuries as prices rise but this looks to be one of the better patterns and should not be faded just yet. On signs of this pulling down under 2.30%, one can consider shorting Treasuries. For now, this move has happened very quickly and signs of exhaustion are now still absent. TLT looks to be a long, and would use any minor pullback to still buy dips.

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Utilities look to be one of the better sectors to favor in the short run to overweight. As written up the March 11 Weekly Technical Perspective, this group has turned higher and has outperformed in the short run. While the longer-term pattern shows XLU to have a lot of resistance up at $60.50-61, the near-term shows a very good likelihood that this can be met. Last week's gains helped prices get up to and over prior highs on a daily close, and likely help to spur on price gains to $60 at a minimum into mid-April before any peak. So Utilities along with REITS, and Consumer Staples, & Telecomm, the so-called Defensive trade, should work in the next few weeks. In this case above, XLU should be owned and recent stocks mentioned in the Daily reports such as PNW, SRE, EIX, NEE should be favored as Utes that could show better than average relative strength.

The US Dollar - Minor gains this week should be right to sell into given larger pattern. The Dollar decline has reversed course as of late last week, but technically it's right to look to sell into gains over the next 1-2 weeks, favoring a pullback under recent lows that should drive the Dollar lower in the months to come. This larger consolidation pattern has been at work since May of last year, and the choppy action just in the last couple months following the October 2018-January 2019 decline argues for lower prices on an intermediate-term basis, not higher. So while a bit more strength is possible given last Thursday's reversal and attempted push higher above the minor downtrend from two weeks ago, this should create opportunities to sell US Dollar and buy Pound Sterling and Euro.

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Gold's pattern has turned more bullish lately with the bounce attempt after having broken down from its most recent failed test of 1340-6. Given that the US Dollar has attempted to stabilize and bounce over the last couple days, this resilience in the face of Dollar strength is impressive. However, much of this Gold strength is happening as rates plummet, which some might view as more plausible. Near-term, technically, one would expect resistance on this rise anywhere from 1327-1346 again in the weeks to come. This minor bounce hasn't completely washed away the technical negative of having broken the three-month trend from last November's lows. Until there are more concrete signs of the US Dollar turning down, this could still take some time for Gold. However, on a breakout above 1375, this would be the real signal that argues for a larger advance to unfold. The broader trend since last Summer has indeed improved, so it's thought that a larger move higher should be in the process of getting underway. Near-term, however, it's a must to have patience until prices can clear former highs that have proven to be so challenging over the last few years. Once this trend starts to get underway higher, one can have a more material bullish intermediate-term thesis without worrying as much about the near-term swings.

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McClellan's Summation index (A smoothed version of the McClellan Advance/Decline oscillator ) shows breadth having tapered off in recent weeks. As seen above, Breadth has actually been worse than expected in recent weeks despite the market's lift. Thus, last Friday's downturn coupled with a potential Monday follow-through could be important in signaling the start for Equities to gain some much needed consolidation. This will be something to monitor closely in the days and weeks to come. For now, the minor pullback isn't all that damaging, but simply a warning sign for a possible pullback sometime in April as breadth is not cooperating with price action. Divergences in charts like these can often be important in signaling a chance in trend. As the bottom part of this chart showed in December vs January, momentum oscillators ON breadth itself made a higher low in October compared to December/January, which was a key positive in suggesting the Equity decline should be near exhaustion. For now, any bounce attempt back to last week's highs this week likely should be viewed with suspicion given the degree of breadth falloff in recent weeks.

Can this Run in Technology continue? Bullish into end of March, then a Stallout likely

March 18, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2764-5, 2727-31, 2678-81, 2672-5

Resistance: 2815-8, 2824-5



Summary:  US Equities have now trended higher in 10 of the last 12 weeks, with SPX gaining nearly 500 points in just under 3 months' time, or +20% since Christmas Eve 2018. Trends which had begun to wither a bit into early February managed to hold support after just minimal drawdowns and then last week regaining all of the prior week's losses. Now the act of having pushed up to new highs on better breadth and momentum this past week keeps the near-term technical situation looking bullish and still difficult to fade, despite the extent of recent gains. While this rally is thought of as one to consider selling into next month, it's important to see signs of Technology starting to turn lower and for S&P to give back the area of its most recent breakout. At present Technology does not seem ready to rollover, and still should be overweighted this week as further gains seem likely.



Outside of Equities, we've seen signs of the Dollar turning back lower, albeit within an uptrend that began in late January. While commodities have tried to stabilize, it still looks a bit early for this to work until February lows in BBDXY index can be breached. Meanwhile, Treasuries have been persistently strong, similar to Equities with yields reaching the lowest levels since January (TNX)



Sector-wise, it was thought that Technology and Industrials would have a difficult time carrying this rally by themselves, as both are showing gains of more than 15% YTD. It was thought that other sectors would need to come to the rescue. This looks to be happening slowly but surely. Just in the last week we've seen measurable signs of Financials and Healthcare starting to outperform. This is not immaterial, as these two sectors combined account for over 25% of the SPX. Thus, there has been a broadening out in this rally that can't be overlooked. The main risks at this point have to do with Tech stalling and rolling over (discussed below with charts) along with counter-trend signs of exhaustion appearing. Meanwhile momentum not rising as quickly to confirm this recent push back to new monthly highs is important. However, the bottom line is.. we'll need to see evidence of index weakness to pay attention, and overall, that just hasn't happened.



As the chart below shows of the MSCI AW World index (EX-US), most of the globe has rallied in lockstep but at a slower pace, after having weathered a much more difficult 2018. Thus, the snapback rally here has not even recouped 50% of last year's drawdown. Yet, the act of exceeding the downtrend does still suggest further gains are possible in indices globally in the months ahead, and it looks premature to fade this rally. Note that last year's pullback got right down to important support which had held prior pullbacks as what happened in early 2016. Thus, it's often important to take a look at charts outside of the SPX to put things into perspective.

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TECHNOLOGY- Has this move run its course? Or is there more likely?This week's charts and discussion center on Technology, which has bolted higher to take the lead again this year with very sharp gains in recent weeks.Technically speaking, it looks premature to give up on gains into this week, as it looks very likely that this coming week and potentially the next could be positive. Technology has moved back to new all-time highs on an Equal-weighted basis, while main Technology gauges like S&P 500 Information Technology index are within striking distance of all-time highs and look likely to challenge these areas in the next 2-3 weeks. However, as will be discussed below there are some intermediate-term concerns, largely hinging on momentum having turned down sharply late last year on weekly/monthly charts. This will need to be resolved by continued sharp gains back to new highs on relative and absolute charts. However, some indices like the SOX look to be just below prominent highs and showing negative momentum divergence that likely could make this sector slow. Bottom line, for March, it looks right to be involved with Technology and overweight this group. However, on signs of Tech stalling into April and/or May, it's right to watch for the degree of any consolidation and /or decline before weighing in on the balance of the year and/or next. It's thought that Tech likely does stallout into the Fall of 2019 and might begin a period of underperformance given the monthly charts waning in momentum. But at present, it's tough to give up on this sector until prices begin to weaken materially and one cannot abandon Tech simply because of prices being overbought alone, as plenty of good charts remain in place.




Most Important Technical Developments of the Past week:



1) TNX broke down last week to the lowest levels since January (US 10yr) as did the 2 and 5 year yields. (30 year held up in stronger fashion)

2) Financials began to turn higher and outperform and Regional banks in particular look attractive to outperform. Interestingly enough, this group has worked despite yields turning down sharply


2) US Dollar index turned down over the last couple weeks, and this weakness has helped a bounce in both China and also Emerging markets


3) Momentum and breadth which flattened out a bit into late February, have turned up a bit, with momentum in particular moving up to test levels of late February. For now, momentum is not as high as was seen in late February, so this has created the start of some negative divergence. Yet, until prices turn down, this can certainly continue this current week. Breadth, meanwhile, has improved by the Advance/Decline pushing back to new highs. Yet, momentum on breadth is much lower than in late February.

4) Sentiment looks to have contracted further in the last week, with AAII converging to show just a 1.36% spread between Bulls and Bears. After having widened out into late February to nearly a 20% spread, now this has retreated to near unchanged. Thus, sentiment certainly isn't too complacent right now in a way that would put in a top. (Back in January 2018 this showed over a 40% spread between Bulls and Bears)


5) Demark "Sell Setups" were formed this past week on weekly charts for Value Line Arithmetic, SPX, NASDAQ, DJIA, SX5E, along with many major sectors, including XLK, XLI, XLE, XLY, XLB, XLF. Note that Daily counts however, have been recycled and now are continuing up on different counts. Thus, its thought that when these complete and Daily and weekly are in alignment, this should coincide with at least a short-term peak, likely in late March/early April.

6) Cycles- (time period between 3/20-4) This month brings about an important six-month anniversary to last September's peak, while being 90 days from the late December lows, 270 days from the late June 2018 lows, and 120, 135 days from the November turns, which suggest the following periods could be important: Additionally this rally from late December will be exactly equal in time to the pullback from mid-September as of March 29.

7) Crude oil looks to have made a decent about-face and should push up to $61-$63 in the weeks ahead into April. Meanwhile, Gold and Silver look to have begun at least minor drawdowns in recent weeks and this looks to continue.

8) Sectors like Industrials and materials both underperformed last week, while Technology and Healthcare made sharp gains. This continued rotation into Tech looks important and bullish in the short run.

9) Defensive sectors like Utilities and REITS did manage to both make absolute breakouts in the last couple weeks, though both are nearing areas of resistance on weekly and monthly charts. Additionally, relatively speaking, both lagged last week. It's thought that both sectors should be less likely to continue recent gains.


10) Small-cap outperformance ended quickly in late February and this has been given back sharply in recent weeks. While this isn't necessarily bearish for the overall market, it's important to mention given that the first two months showed very promising strength in this group.




LONG IDEAS within Technology: A, CRM, FLT, GPN, PANW, TEAM, RNG, PCTY, PAYC, PYPL, COUP, CYBR, SPLK, AMZN, NFLX




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:



Short-term (3-5 days): Bullish into late March before stalling out- Last week's push above 2825 keeps the near-term trend positive and exhaustion signals are premature for a turn. The combination of these along with the fact that momentum has lessened in its intensity should still allow for additional strength this week. While the week following March Quad-expiration historically has been negative following a positive week, we'll need to see movement back down under 2788 to pay attention. Until then, trends look likely to push even further higher with targets at 2850-60 for this week

Intermediate-term (3-5 months)- Bullish- While monthly momentum remains negative for many indices given our weakness since September and particularly since December, the near-term trend remains positive from late December and the breadth thrust combined with bullish seasonality and ongoing pessimism combined with recent sector emergence (Technology and Financials breakouts) should lead equities higher into the Spring/Summer before any further rolling over happens that causes more intermediate-term damage. The latest strength over the last few weeks has now caused weekly MACD to turn positive and join the Daily momentum in moving up. Thus, it's looking increasingly less likely that an immediate retest of December lows is likely, but something of the sort certainly cannot be ruled out for September/October of this year. Structurally, as has been noted, we have seen technical improvement in US benchmark indices, with prior lows having been recouped along with downtrends from last Fall's highs being exceeded. While the average stock is now officially in a bear market, most market indices are not, and many arithmetic charts still show the uptrends for market indices to be intact. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.


10 important Technology Charts heading into this week, sector, index charts and then 3 attractive stocks to consider

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Technology relative to SPX- Bullish for further gains to test 2018 highs.Relatively speaking, this chart of S&P 500 Information Technology index v SPX shows the recent breakout last month that helped Technology start to accelerate and outperform in a big way. This strength helped Tech regain the top spot for 2019 performance, and this move does not yet look complete. Daily charts of Tech/SPX still argue for another 1-2 weeks of outperformance, and given the sharply upward nature of momentum recently, this looks to get near former highs from Summer 2018 before slowing. Until there is evidence of Technology stalling out, it's right to be long/overweight, expecting further near-term relative strength, and likely a lack of any market correction until late March.


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Technology (S&P 500 Information Technology index) Bullish, but faces a tough task after rallying to near 2018 highs. Technology as seen on monthly charts began to turn up sharply back in 2016 and accelerated faster once prices got up above former highs from 2000. Often the first breakout above a former high should allow for some upward follow-through. While the last three months have been higher this year after last year's drawdown, it's imperative for Technology to reach and exceed last year's highs to keep this chart in good shape. The slowdown in momentum from last year remains a concern on an intermediate-term basis for Technology, so it's thought that Tech faces its first real test in the next 2-3 months after this recent run-up. Bottom line, movement back up over 1338.90 sooner than later would be a very good sign. More likely, however is that Tech stalls out this Spring slightly under this level and consolidates. Movement back under 1162.76, or February 2019 lows, would be problematic for Tech for this coming Summer and Fall, so this is what to watch for that could be an issue for Technology and for the market as a whole.


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NASDAQ vs SPX relatively-No signs of this turning back lower. Along with keeping a close eye on Technology, watching the relative performance of the NASDAQ itself is often useful as it's Tech and Biotech heavy in weighting, and the start of relative out/underperformance can often give early warning signs about Technology along with turns in the broader market. As this relative chart shows above, the NASDAQ/SPX chart peaked out last June, providing a three-month warning on when the broader market topped out. The decline undercut its lengthy uptrend in early October 2018, coinciding with the start of more substantial market weakness which lasted through December. In similar fashion, the turn back higher managed to exceed downtrends from last Fall earlier than the broader market accomplished this. Thus, an early warning on market strength occurred which preceded the larger advance in the broader market. Overall, relative chart of the NASDAQ to broader market can be helpful to watch closely. For now these are still pointing to a bit more strength over the next 1-2 weeks.


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NY FANG index (Bloomberg)- FANG looks to be breaking out. As relayed last week in "Newton's Notes" , The FANG stocks look to have exceeded a meaningful area of trendline resistance that has served as resistance for this group since last Summer. This goes a long ways towards explaining some of the underperformance earlier in the year. The last week of strength, however, seems to argue that this part of Technology is now trying to play "catch-up" after the lengthy consolidation.


Semis look to be nearing resistance & likely stall by the end of March -The Philadelphia Stock Exchange Semiconductor Index (SOX) has strengthened up to an area of important resistance stretching back since mid-2017. In the short run, this is likely to provide some solid near-term resistance at 1425-1450 that likely holds prices. However, in the event this is surpassed, prices likely would trend up to 1500-25, which should constitute a strong area to sell. Given the 18 month consolidation and downturn into last December, this recent rise has had little effect on momentum which has been much weaker than what's been seen back in late 2017. Thus, the start of negative momentum divergence looks to be a serious challenge for the longevity of this advance, if and when prices push up to new highs. Bottom line, the next 3-5 days look to be positive for Semis, but one should expect a stalling out, and the next 2-3 years might prove difficult to achieve the kind of gains which occurred in 2016-7 given the slowdown in momentum.


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Equal-weighted Technology vs SPX (SPXEWIN index-Bloomberg) v SPX- Near-term bullish for Tech, as the breakout now has managed to exceed former highs from 2018 and looks poised to push up further this coming week. When looking on an equal-weighted basis for Technology, relative to the SPX (SPXEWIN index vs SPX) the breakout late last year provided a "green light" for Tech outperformance, as this equal-weighted index had exceeded a key downtrend going back since last Summer. At present, we've seen some stalling out, but now in the last two days, this ratio has begun to turn higher yet again. Overall, movement back to new highs over the next 2-3 trading days looks likely, which should translate into further Technology outperformance into late March, and a continued market rally. Once this begins to stall out and reverse, some clues about SPX and its turn back lower will be evident. For now, it pays to stay the course this coming week, anticipating further gains.

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Apple Inc (AAPL- $186.12) AAPL is growing close to resistance, which could come about between $188-$190 this coming week. The combination of near-term overbought conditions coupled with prices having risen above its upper Bollinger Band and within 2 days of counter-trend exhaustion all makes this a less than perfect risk/reward technically at this juncture in the near-term. While the breakout happened earlier last week near $176-8, at current levels it doesn't have as much appeal. However, the intermediate-term picture given the upward shift in momentum over the last few months is still attractive. Thus, for traders, one would look to sell into gains between Wednesday and Friday this coming week, looking to buy dips. On any weakness back to $178-$180, this present attractive buying opportunities between April and September.

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Salesforce.com Inc. (CRM- $161.51) Attractive to buy for a test/breakout of late February highs. The consolidation in CRM proved mild over the last couple weeks and resembles a Cup and Handle pattern to the chart pattern since last September. Movement back higher looks to have started late last week and it's right to lean long, expecting a test of $166.87 around $5 higher. Movement above this on a weekly closing basis would argue for a push up to $180 as this would constitute a breakout of this six-month bullish base. For now this latter part might prove premature, but heading into this current week, longs are recommended technically, with thoughts of an upcoming challenge of former highs. Any movement back down under $157 would stop out shorts.


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Palo Alto Networks (PANW- $239.72) PANW is attractive for further gains to near $260 in the near future. Its quick rally back to challenge and briefly exceed last Fall's highs looks important technically. This level also was important based on the prior highs hit back in 2015 when PANW made it slightly over $200, a significant high, albeit at a slightly lower level. Overall, further near-term gains look likely to 260, with gains over this level leading quickly up to near $280. Only a pullback under $222 disrupts this rally potential, leading to consolidation before gains can occur.

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Agilent Technologies Inc. (A-$81.10) Bullish as the last few weeks have exceeded the highs of a lengthy bullish base that began back in early 2018. Last week's recovery of the pullback attempt on weekly charts is constructive for a bit more rally in the near future. While weekly Demark indicators are close to completion, this likely will not be in place until early April to signal any sort of upside exhaustion. In the short run, movement up to $85 looks likely, with movement above that taking Agilent up to $90. This lengthy bullish base shown on weekly charts from early 2018 was important when exceeded last month. While the stock has rallied somewhat since that time, the full extent of the rally cannot be called complete, and this pattern remains constructive for further gains. Only under $75 would the advance be postponed.

Utilities look attractive for further outperformance

March 11, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2764-5, 2727-31, 2678-81, 2672-5

Resistance: 2815-8, 2824-5



Summary:  Equities have begun trending lower as of last week, marking the first weekly close at multi-week lows of 2019. Asian indices also fell to new weekly lows, while Europe began a minor drawdown, but arguably held up much better than the rest of the world. Treasury yields fell back to prior yield lows though held prior support, while the US Dollar's gains hit new three-month highs, resulting in meaningful weakness for Emerging markets along with most commodities and China. Overall, it was thought that the breadth and momentum slowdown might finally catch up with stocks, and last week's early Reversal on Monday proved to be the technical catalyst, with a key reversal day on huge downside volume. Given the extent of the move off the lows, which in many indices and sectors has proven to be 15-20% within the last 10 weeks, the upside for the next few months is likely to be not nearly as robust, and selectivity will be very important. To review, in the short run, there were a few reasons to suspect this recent rally might be susceptible into March. Technically speaking, breadth and momentum deterioration, a lower than average Equity Put/call ratio, Demark exhaustion (daily and weekly), defensive outperformance in Utilities, and limited upside based on Weekly Bollinger Bands (2% Std. Deviation) all stood out as potentially having importance, along with the fact that markets peaked out near the 10-year anniversary of 2009 extreme lows (which started this 10 year Bull) All of those looked important.

However, on an intermediate-term basis, we've seen some very constructive signs that still warrant a bullish outlook on an intermediate-term basis for this year. Those concern : 1) Greater than average market breadth on a weekly basis starting with late December/early January breadth thrust /Advance Decline for all equities back at new all-time highs 2) Pattern improvement (SPX getting back UP above areas of important resistance 2630 and then 2715, exceeding trendlines from last Fall 3) Ongoing skepticism about a China deal and overall subdued sentiment after many drew down risk into this decline in December/January and have been slow to add risk back on 4) Bullish seasonality stats going back since 1950 about the time following mid-term election year troughs and the resulting push back higher 5) Technology breaking back out to new all-time highs on an equal-weighted basis (20% of SPX) 6) Decennial cycles of years ending in 9 coinciding with bullish pre-Election year cycles- Both of these suggest this year has a higher than average tendency to be positive 7) Bullish January and February which produced some of the best early year gains in years (while near-term overdone, this factor alone argues for intermediate-term strength 8) Bullish momentum on a weekly basis


So after these negative and positives, we're left with a constructive trend on a weekly basis, yet near-term concern. Last week proved to be the first down week that largely undercut prior lows.. so now what? The daily chart below serves to put this move into perspective. Last week's decline managed to sell off sufficiently to nearly reach the lower Bollinger Band on daily charts. Counter-trend exhaustion now on the downside has nearly completed, and we've seen a contraction in Bullish sentiment in the last week, with AAII gauges (chart below) pulling back to see just a 10% spread now between bulls and bears. So after a huge 15% rally, last week's pullback alone was sufficient to turn sentiment back down and show some meaningful contraction. This looks to be important, as declines that cause sentiment to rise this quickly likely should prove to be short-lived. Thus, it's likely technically in my opinion that this first draw-down is near completion and should not get under 2700.

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Most Important Technical Developments of the Past week:



 1) The Arms index, or TRIN, (Advance/Decline divided by Advancing Volume/Declining volume) produced a very high reading after its rally into last Monday's close, with that reversal day bringing about the highest reading of volume into declining vs advancing stocks for 2019. While TRIN readings over 2 often can bring about capitulatory lows in the market, when they occur following steep rallies on reversal days, the effect is often the opposite (See late 2017)



2) Sentiment seems to have contracted quite rapidly on last week's pullback. Popular gauges like AAII sentiment contracted last week to just 10 percentage points of Bulls over Bears, in a rapid about face to the previous widening. Thus, while Investors Intelligence remains showing a high 30+ spread between Bulls and bears, AAII is now just a tad above neutral. Furthermore, the Equity Put/call ratio showed a steep gain up to .75 which is the highest since mid-January. Overall it's thought that bearish sentiment spiking is a bullish sign for stocks.



3) US Dollar index bottomed out and turned higher sharply to the highest levels in weeks. This looks to have hurt commodities and EM of late, though these might prove temporary once the Dollar turns back lower.



4) China and EEM pulled back sharply given the Dollar rise. The move in China had been delayed and had not followed the US or European move, so last week's late breakdown looked meaningful.



LONG IDEAS within Utilities: PNW, ETR, NI, DTE, AEP


Short-term (3-5 days): Expecting that last week's pullback is nearing support and weakness under 2700 is unlikely before this turns back higher. While Friday could have marked the low, one can't rule out additional near-term weakness given the recent pullback, but should not prove widespread given both the breadth acceleration and some signs of fear coming back quickly. Look to buy into dips this week and expect that markets should start to turn back higher.

Intermediate-term (3-5 months)- Bullish- While monthly momentum remains negative for many indices given our weakness since September and particularly since December, the near-term trend remains positive from late December and the breadth thrust combined with bullish seasonality and ongoing pessimism combined with recent sector emergence (Technology and Financials breakouts) should lead equities higher into the Spring/Summer before any further rolling over happens that causes more intermediate-term damage. The latest strength over the last few weeks has now caused weekly MACD to turn positive and join the Daily momentum in moving up. Thus, it's looking increasingly less likely that an immediate retest of December lows is likely, but something of the sort certainly cannot be ruled out for September/October of this year. Structurally, as has been noted, we have seen technical improvement in US benchmark indices, with prior lows having been recouped along with downtrends from last Fall's highs being exceeded. While the average stock is now officially in a bear market, most market indices are not, and many arithmetic charts still show the uptrends for market indices to be intact. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.


10 important charts on Utilities and Sentiment/Breadth

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Utilities bullish for further outperformance XLU looks to be on the verge of a 3-5 week period of outperformance given the breakout above prior highs from both December 2018 and also late 2017. This is considered to be a constructive technical development and a pattern widely considered to be a giant Cup and Handle spanning the last 16 months. Utilities is the only one of the major sectors showing such a bullish breakout pattern at this time, and should be considered as a Technical overweight, particularly considering last week's selloff after such a lengthy run. Movement up to $59-$59.50 looks likely, and one should use minor dips as something to add to existing longs.

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Utilities bullish near-term, but upside likely limited to $60 in XLU. The weekly XLU puts this recent Cup and Handle pattern in perspective. While the 16 month breakout is certainly constructive, the intermediate-term trend channel should be important in holding this rally on gains over the next month, which lies up near $59.50-$60. This has held this rally on two separate occasions since it began in 2015 and likely should hold on this go-around as well. Thus, it looks right to be near-term bullish, but one should temper enthusiasm about this proving to be anything more than just a 5-7% rally given this meaningful resistance.

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Utilities vs SPX in relative terms appears attractive- XLU v SPX looks to be bottoming out given the breakout, pullback and rise to the highest levels in the last few weeks. Relative charts show a very good chance of this rising further in the weeks ahead, and should rally to challlenge prior highs made earlier this year. Many times these relative charts tend to show movement far before the absolute movement occurs. In this case, this appears like an attractive breakout, pullback and now turn back higher, while the absolute charts were more of a traditional breakout.

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The breadth correction started in the last week after recent push back to new highs. Advance/Decline on "All stocks" has just pulled back to violate the trend from late December. The strength of the move from late December is thought to be a real positive but yet now has begun to correct this move to new highs. Overall, this pullback and trend break is a minor negative but overall should prove short-lived given the positives of the push back to new highs.

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American Association of Individual investors Sentiment (AAII) has contracted to just 10.6 points of Bullish vs Bearish spread as of last week. This is a pullback from earlier 25 just a couple weeks ago and shows the extent to which this recent weakness and signs of economic slowdown have taken a toll on sentiment. This goes to show that further intermediate-term weakness could prove short-lived as sentiment might turn bearish too quickly.

Pinnacle West Capital Corp (PNW- $93.16) PNW has formed an attractive Cup and Handle pattern in the last 16 months that makes this appealing to buy the breakout, expecting further gains ahead. Similar to the broader Utility space, PNW has just gotten up above prior highs from December 2018 along with November of 2017. Weekly momentum is not overbought, and Demark exhaustion is still premature on monthly charts based on TD Combo, requiring another 2 months of gains before this should begin to stall out. This looks precisely like an appealing time to own this near-term given some of the recent market volatility which began again last week. Gains up to $100 look likely and one should use pullbacks to 90 to add to longs given the improvement in its technical structure. While near-term targets lie near $100, one can use trailing stops and own provided this remains above $92.64 on its advance.

Entergy Corp (ETR- $92.49) Bullish- ETR has broken out to the highest levels since 2008 just in the last couple weeks, exceeding the highs of a bullish base which had begun in early 2015. This should allow for additional upside in the weeks and months ahead, and targets the 61.8% retracement zone of its 2008-9 decline near 101. Specifically the appeal for ETR here despite a 10%+ move YTD has more to do with its intermediate-term pattern shown above, and exceeding this larger 4 year triangle is thought to be quite constructive technically. While ETR has reached the 50% level of its prior drawdown from 2008, no counter-trend measures of exhaustion are in place that would suggest this should peak out here. Thus, additional upside looks probable given this recent technical improvement, and this should be overweighted for the weeks/months ahead.

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NiSource (NI- $27.42) NI just starting to show evidence of breaking outafter having trended neutral/range-bound for the last few years. Last week's rally managed to exceed the trendline guiding the highs of the recent short-term triangle pattern. This likely carries NI back above $30 and could extend given the extent of the longer-term range-bound pattern which has been intact since 2015. Overall this appears like one of the better risk/rewards given a breakout in Utilities given that NI has not already made its move but has been basing. This recent push to new multi-week highs should serve as the technical catalyst for further acceleration.

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DTE Energy (DTE- $123.20) Bullish- Move to 130 likely Similar to the broader Utility space, DTE has appeal given its move to just exceed prior highs of this recent base which has been intact over the last couple years. The act of making a weekly close above $121, specifically given the trend connecting this high to the prior from 2017, should allow for upward continuation in the weeks ahead. Movement up to near $130 looks likely, with stops on longs put near $118. Overall, it's worth following the Utilities that are breaking out coinciding with the larger sector making a similar move, and this should lead performance in the weeks ahead.

American Electric Power (AEP- $81.95) Bullish given the act of pushing back up above areas of resistance that have held since late 2017. While similar to the broader Utility space, AEP has made a series of higher highs within a larger channel starting in 2015, it's been the most recent bullish base formed since 2017 that gives reason for the near-term optimism. Given that both weekly highs occured between $877-$80 and AEP has just gotten above this area, the pattern reflects a Cup and Handle which likely propels this up near $85 in the weeks ahead. Thus, while broader market volatliity has come back over the last week, this Utility has just broken out to new highs and should offer some outperforamnce into April for those looking for selective longs. Stops on longs under $78 on a close with upside targets near $85.

Healthcare looks to be on verge of turning higher relatively; Stock indices look to be nearing exhaustion

March 4, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2764-5, 2727-31, 2678-81, 2672-5

Resistance: 2815-8, 2824-5



Summary:  Equities have now risen for 9 of the last 10 weeks (SPX) with late January missing just by a hair in being positive. Breadth and momentum, which had both started out fairly positive in late December/January, has flattened out a bit in the last couple weeks, but we've seen precious little evidence of anything but rising prices with a huge string of higher highs, higher lows and higher closing prices on weekly charts since late Christmas Eve. Overall, Markets will be unable to continue rising at this pace, as we've now seen gains of more than 450 points in 10 weeks time, or 19.2%. It's likely that March brings about some type of trend reversal (at least on a short-term basis) but it's expected to prove minimal and end up being a buying opportunity for further gains into April. Overall, until there is evidence of prices turning down, it's difficult to highlight the negatives over the price structure alone which has proven downright resilient. We'll be on watch for evidence of some stalling out (as given some of the reasons listed below, i do feel there's an above-average probability of this happening) Yet, it still looks proper to use 2764 as the dividing line in the sand for Bull/Bear and being over this level keeps the rising trend intact. With regards to Fixed income, the most technically important move last week seemed to come with Yields starting to turn higher dramatically ,which happened in the 10 and 30 year Treasury, while USD/JPY also followed suit. This had been sorely lacking in previous weeks and was listed as a warning sign, but similar to early January, yields look to be following the bounce in Equities, not vice versa. Furthermore, the Dollar decline looks to have reached a temporary floor and last Friday's gains look nearterm bearish for commodities, particulalry the Precious metals after a big run. Overall, the risk appetite seems to be slowly coming back into stocks, but positioning still indicates that Money market inflows are the highest in nearly two years, and had risen last month to the largest level since early 2016. This BofA Merrill Lynch GFSI Money Market flow index shows net flows into Global money market funds as a fraction of total Equity market capitalization. Since the October-December 2018 decline resulted in such a huge period of risk being taken down, this hasn't all come back yet. Thus, intermediate-term sentiment is telling a different story than some of the recent complacency that's entered the market, suggesting that pullbacks in March still could prove to be buyable.

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Most Important Technical Developments of the Past week:


 1) TNX and USDJPY both showed very sharp rallies into end of week, suggesting that the recent non-correlation to Equities might be ending. This is seen as a promising sign for Financials as the Yield curve has begun to steepen as well




2) US Dollar index looks to have bottomed near-term. While the patttern in the last few years remains range-bound and the larger pattern suggests a period of Dollar weakness in the years ahead, at least for the short-term, the Dollar looks to have bottomed out.




3) Momentum and breadth which both started out quite positive in early January, have both flattened out in recent weeks. Daily MACD has turned negative based on last week and both the Advance/Decline and Stocks trading above their 200-day ma both peaked around 2/20-5.




4) Sentiment looks to be finally nearing a time when AAII has joined Investors Intelligence in widening out in the spread between Bulls and Bears (It only took 10 weeks and a 19% GAIN !!! ) Bulls/bears now is over 20% in AAII, and is more supportive of a near-term peak in stocks




5) Demark "Sell Setups" should be present this week on a WEEKLY basis for Value Line Arithmetic, SPX, NASDAQ, DJIA, SX5E, along with many major sectors, including XLK, XLI, XLE, XLY, XLB, XLF. This is the first time that Weekly exhaustion has lined up with Daily since late December, and utilizing weekly counts often can add to greater success when looking for reversals.




6) Cycles- This month brings about an important six-month anniversary to last September's peak, while being 90 days from the late December lows, 270 days from the late June 2018 lows, and 120, 135 days from the November turns, which suggest the following periods could be important: Additionally this rally from late December will be exactly equal in time to the pullback from Early October as of mid-month. Looking at March, the following periods have the potential to be important: 3/5-6, 3/15-7 and 3/24-6.




7) Gold and Silver look to be peaking out in the short run and given the 1-2 combo of Rates and Dollar rising, these could selloff more in the short run with targets down near 1250 for Gold and a likely maximum move to 1220 which should be buyable.




8) Sectors like Industrials, Tech and Discretionary are all nearing upper Bollinger Band areas on weekly charts, which combined with the Demark exhaustion, will make for a difficult time pushing too much higher without consolidation.




9) Small-caps have made an impressive enough comeback vs the Broader market that it should pay to own Small caps this year, as the RTY vs SPX managed to break out above its six-month downtrend and RTY also got above three different prior lows since 2016. This looks meaningful and RTY should be favored and bought on pullbacks.




10) Healthcare looks to be on the verge of starting to turn back higher after nearly six months of underperformance. Some of this was due to mean reversion and turning down after a very decent period of performance. But this group is now showing Daily and weekly downside exhaustion and it looks right to position long in Medical devices, and Pharma while still avoiding the Services stocks


LONG IDEAS within Healthcare: MTD, ZTS, VRTX, REGN, SRPT, VCEL, COO, DXCM, SNN, AZN




SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:




Short-term (3-5 days): Expecting short-term peak this week or next- but until weakness happens, trend still bullish until/unless 2764 broken - Raising stops on longs- Still no evidence of any deterioration, but stock indices and many sectors will show counter-trend exhaustion this week, while momentum and breadth have started to falter. It looks right to consider selling out of Technology to go into Healthcare




Intermediate-term (3-5 months)- Bullish- While monthly momentum remains negative for many indices given our weakness since September and particularly since December, the near-term trend remains positive from late December and the breadth thrust combined with bullish seasonality and ongoing pessimism combined with recent sector emergence (Technology and Financials breakouts) should lead equities higher into the Spring/Summer before any further rolling over happens that causes more intermediate-term damage. The latest strength over the last few weeks has now caused weekly MACD to turn positive and join the Daily momentum in moving up. Thus, it's looking increasingly less likely that an immediate retest of December lows is likely, but something of the sort certainly cannot be ruled out for September/October of this year. Structurally, as has been noted, we have seen technical improvement in US benchmark indices, with prior lows having been recouped along with downtrends from last Fall's highs being exceeded. While the average stock is now officially in a bear market, most market indices are not, and many arithmetic charts still show the uptrends for market indices to be intact. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.


10 important Charts heading into this week, Recent Technical developments in Equities, along with Healthcare charts

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SPX trend bullish near-term, but warnings now appearing on daily and weekly charts suggesting trend should reverse in March, even if short-lived. SPX has now gained nearly 20% in the last 10 weeks from intra-day lows on Christmas Eve 2018. This retracement has carried over 75% of the prior decline and puts prices within 5% of all-time highs. At present, the risk/reward isn't as ideal for new longs heading into March based on the following developments. First, as seen in this weekly chart above, counter-trend "TD Sell Setups" can be formed as early as this week with just a move over 2813.49 in SPX cash on weekly charts. These have been important in the past in signaling exhaustion that has led to trend reversals. Second, the upper area of the 2% Bollinger Band hits just above current levels. This is likely going to provide at least some minor resistance. Third, momentum based on gauges like RSI is now at a 69 on daily charts and has begun to diverge from peaks made in mid-February. Fourth, other momentum gauges like MACD have rolled over to negative now on daily charts. Thus, there seem to be some things in place now which argue for this rally to stallout and make at least a minor reversal before prices are able to reach former highs. Risk/reward is not as favorable and one should be on the lookout for trend reversals in the next couple weeks, potentially as early as this Wednesday/Thursday. Under 2775 would serve as the first warning and then under 2764 allows for a pullback to get underway, which should prove short in nature.

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Treasury yields broke out of minor trends last week- Daily charts on 5, 10 and 30 year yield Treasuries show the last few days of gains in yield terms, which exceeded the minor trend of the last month. This looks to be an important development technically at a time that yields had lagged the equity move as both Treasuries and Equities were moving higher in tandem through the back half of January into February. Now Yields along with USDJPY both look to be moving higher to join the Equity rally, not dissimilar from what was seen in early January. While Yields have pushed up above the higher Bollinger band, any minor dip in yields should prove to be a chance to sell Treasuries, expecting higher yields in the month of March.

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Gold and Silver have both turned down in recent days as the Dollar and Yields have shown signs of hitting support and turning back higher. As mentioned above the Yield breakout looked to be significant. The Metal trade meanwhile broke down below the uptrend of the last six months. It's thought that Gold could pullback down to 1250 without too much trouble. While the intermediate-term prospects have improved for the Metals given the Dollar weakness, it's recent pullback looks to have additional downside in the month of March before this stabilizes. One should hold off on buying dips until this move plays out.

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XLK- Technology ETF- Technology looks to be nearing absolute levels of importance, and could stall out in early March. While as we've discussed in the daily reports about Technology breaking out in relative Equal-weighted terms vs SPX, the XLK itself is set to record signs of exhaustion now on a counter-trend basis in early March, while nearing the highs of its downward sloping Bollinger Band, the 2% standard deviation of price movement. Additionally, when Tech broke down under its 2-3 year uptrend, it was thought to be bearish and did in fact lead lower. Now we're seeing prices on the verge of retesting the area of its breakdown, something which also has importance. Overall, it's thought that the area at 71.50-73.50 has real significance as a key area of resistance, and one should consider either lightening up into this area, or hold off from chasing the Tech rally.

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Healthcare looks to be on the verge of trying to bottom out and turn back higher, something which on a relative basis bodes well to consider using recent relative weakness to overweight this group. As weekly charts of XLV/SPX show, we saw a breakout last year of nearly a 3-year downtrend in Healthcare. However as the broader market bottomed out in December, this group undperformed relatively. Now we're seeing evidence of both Daily and weekly exhaustion counts on Healthcare right at a time when this is testing the area of the lower Bollinger Band, just above the area of last year's breakout. This creates an attractive risk/reward to overweight Healthcare and look to add to this on evidence of this confirming these Demark signals and turning higher.

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Healthcare might be better to favor in the months ahead vs Technology.Relative charts of XLV to XLK, or Healthcare vs Technology, show a similar pattern of a breakout in this pattern followed by a retracement in the last couple months. This brings about an attractive risk/reward in trying to buy into Healthcare vs Tech, and investors that are too "tech-heavy" might want to consider Healthcare which looks attractive to buy dips after this minor pullback.

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Pharmaceutical stocks look attractive given the bullish base in DRG which has grown more attractive in its ability to push higher to test the highs from late last year. DRG peaked out in 2015 and this level wasn't retested until late last year. While a natural area of resistance that resulted in some backing off in this index, we see that prices have immediately pushed back to just below these former highs. The quickness with which prices have moved back higher is seen as a very bullish development for this sector, and should drive prices to make a larger breakout in the weeks and months ahead. Given the signs of Healthcare trying to bottom out relatively, a breakout in Pharma stocks would make good sense, and something to watch for carefully in the weeks ahead.

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Biotech likely to stall out near former highs within 1-2 weeks. Biotech, as shown by the XBI, or SPDR S&P Biotech ETF, looks likely to show further near-term strength which should retest former highs. Yet, this sector has already made a large rally in the last couple months given the extent of the drawdown, and weekly exhaustion counts, similar to the SPX, are within 1-2 weeks of forming. Thus, this rally likely should stallout near former highs vs thinking an immediate breakout is imminent. One can still favor many of these stocks on an intermediate-term basis, but near-term, it's more likely that some type of stallout happens in March, so one should look to buy pullbacks if given the chance in the weeks ahead.

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IHI, or the Medical Devices ETF, has just pushed back to new high territory, something that leaves this sub-sector in much better technical shape than what's happening with either Pharma, or Biotech. While near-term overbought, the act of pushing back to new high territory should help prices move to 240-5 without too much trouble before hitting resistance. Overall, the Medical Devices sub-sector appears to be the strongest part of Healthcare.

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Healthcare Providers, on the other hand, are the weakest part of Healthcare and should be avoided as an area to consider, in favor of Medical Devices, Pharma or Biotech. Charts of the IHF, the Ishares US Healthcare Providers ETF, Weekly charts show the large uptrend in this group being broken and prices recently being repelled after having rallied to test the area of the former breakout. This often is important in suggesting further weakness. Thus, until there is evidence of February highs being exceeded for IHF, it's right to hold off on buying dips, and expect that further underperformance is possible in this one area of Healthcare.

Rally extends to Dec highs as China trade truce extended

February 25, 2019

Mark Newton CMT, Newton Advisors, LLC

Contact: info@newtonadvisor.com



S&P 500 Cash Index

Support: 2727-31, 2678-81, 2672-5, 2622-4

Resistance: 2800-1, 2815-8, 2824-5



Summary:  Equities continue to charge higher, as this past week now marks 8 of the last 9 weeks of gains. While sentiment is growing a bit more constructive from its December 2018 pessimistic levels, it's nowhere near levels of complacency that marked the peak around this time last year back in January 2018, 13 months ago. Trends remain bullish near-term, momentum has turned bullish on daily and weekly basis, and Breadth has been much more constructive of late. Thus, heading into the final week of February, there still seems to be little with regards to price or momentum lately that would suggest this trend is stalling out. Bond yields meanwhile have been churning but largely lower, and have all but ignored the equity gains of late. The Dollar continues to show signs of peaking out, and has turned down a bit more forcefully of late. Meanwhile Commodities have begun to lift along with Materials and mining stocks and Emerging markets have firmed. Most of this still seems quite constructive heading into this week. While it's right to try to pinpoint factors that might allow for a slowdown and/or reversal, price is the most important factor and nothing price wise has yet to show meaningful enough deterioration that would allow for a reversal. Thus, while counter-trend signals are now abundant this coming week in suggesting some type of Reversal should be near, we'll continue to utilize the uptrend from December, and until this is broken, it will be right to still stay the course. The chart below highlights the Value Line

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Overview: Equities continue to be largely "unloved" while trends have steadily pushed higher. The uncertainties of China Trade policy have largely had little effect in causing any ripple to this bounce, and technically speaking it's always been right to lean more on trends then to anticipate what might be factored into the market or not on Trade. Technically it's likely that this trend DOES show some type of stalling as we enter March, given the confluence of both Counter-trend exhaustion now on multiple sectors, indices while Treasury yields remain quite weak. However, trends remain bullish near-term and simply have not given us much reason to want to fight them, regardless of momentum "nearing" overbought levels, or Treasuries rallying sharply as well. Breadth has been quite strong in the last months, and Summation index (chart below) has risen to the highest levels in over 2 years. Skepticism of this rally is also a factor and many who missed the rally are now holding out for pullbacks to buy, as opposed to chasing this move. Furthermore, the "smart" money as per CFTC data shows no evidence of shorting into this move and indicates a bullish bias, which is largely constructive on an intermediate-term basis. This week, the focus this week will be trying to pinpoint what still CAN work, as opposed to trying to fight this move. After all, as discussed, there still has been no meaningful change in this trend from late December. Until this trend starts to give way, it's right to just concentrate on what has an above-average chance of continuing to work in the days and weeks ahead. However, it's not wrong to think that this recent pace of gains will be very difficult to sustain in the coming months. Given the extent of the deterioration which took place in October-December, monthly momentum remains negative and quite a bit below the peaks which were registered near this time last year. Thus, this recent rally has largely had little to no effect in carrying momentum back to near recent highs and this will continue to be an intermediate-term issue for stocks.


Overall, the recent technical damage in the US Dollar looks important and the focus should be diversifying out of Equities after a 17% bounce and into Commodities given their recent stabilization. Metals and mining stocks, and Chemical names look like better risk/rewards than Technology, though selective longs in Industrials, Discretionary and Tech still looks prudent given the extent of the positive momentum of late. Bottom line, the bullish seasonality combined with a less than enthusiastic sentiment situation and recent trend breakouts looks to still favor a bullish view on Stocks overall for the months ahead, with any minor pullback that breaks uptrends from December thought to be short-lived and not something which immediately leads to a retest.


LONG IDEAS: TOL, ITB, STX, WDC, FTNT, CRM, FXI, CLX, CHD, INFO, STOR

SHORT IDEAS: TTWO, ACOR, M, SNPS, HAE


SHORT-TERM / INTERMEDIATE-TERM TECHNICAL THOUGHTS ON SPX DIRECTION:


Short-term (3-5 days): Bullish until/unless 2731 broken - Raising stops on longs- Markets have flattened a bit but the trend has not turned down sufficiently to think this week will be lower. SPX is now within striking distance of early December highs, which was thought to have some importance heading into Late February. (overnight futures higher on china tariff truct delay) Counter-trend signals will be in place this week. Yet, quite a few indices and sectors have now broken out, and it's thought to be likely prove to be a short-term stalling/reversal only which then should be buyable into this coming Fall. Above 2803 would lead to 2815-8, and this could have importance into mid-week. But important to see evidence of 2731 broken to have any real concern and then this would likely lead down to 2681 the 2/8 lows. Remaining above this over the next couple weeks keeps the trend in very good shape.


Intermediate-term (3-5 months)- Bullish- While monthly momentum remains negative for many indices given our weakness since September and particularly since December, the near-term trend remains positive from late December and the breadth thrust combined with bullish seasonality and ongoing pessimism combined with recent sector emergence (Technology and Financials breakouts) should lead equities higher into the Spring/Summer before any further rolling over happens that causes more intermediate-term damage. The latest strength over the last few weeks has now caused weekly MACD to turn positive and join the Daily momentum in moving up. Thus, it's looking increasingly less likely that an immediate retest of December lows is likely, but something of the sort certainly cannot be ruled out for September/October of this year. Structurally, as has been noted, we have seen technical improvement in US benchmark indices, with prior lows having been recouped along with downtrends from last Fall's highs being exceeded. While the average stock is now officially in a bear market, most market indices are not, and many arithmetic charts still show the uptrends for market indices to be intact. Overall, it's right to be constructive on 2019 given likely positive January performance combined with bullish cyclical trends for this year, and expect that the larger bear market likely gets postponed until 2020.


10 important Charts heading into this week, showing some of the recent Technical developments in Equities, FICC, and Sentiment

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Equal-weighted Technology is now moving back to new highs.Bloomberg's Equal-weighted Tech index on an intermediate-term basis has shown remarkable improvement in the last week vs the broader market during a time when it was thought that most Tech was nearing resistance. While counter-trend exhaustion still looks to be close for Technology, this Equal-weighted Tech vs SPX chart has just broken back out to new all-time high territory. This can't be viewed any other way than bullish in the near-term. While Semiconductor stocks certainly have work to do given the SOX still under 1400 (See charts below) this movement in Tech is a welcome development that should allow for additional Tech strength in the weeks and months to come.

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Industrials breaking out- Industrials when shown on Equal-weighted Basis, are also now just breaking out, with last week's close above the highs of this intermediate-term trend of Equal-weighted Industrials vs SPX. (Measured using Invesco's S&P 500 Equal-weight Industrials index (RGI) vs SPY ) Given GE, MMM, BA weight in index, it's thought to be more accurate to use Equal-weighted Industrials vs just the XLI. Overall, a breakout of the trend which has held since last year is thought to be a positive development for this sector and can allow for additional gains.

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Europe is getting close to its first meaningful area of upside resistanceWhen eying the IEV, the Ishares Europe ETF, additional gains look likely early in the week, but appears to be heading right towards a serious area of trendline resistance drawn from last year's highs. Similar to the SPX, counter-trend exhaustion will form this week and this looks to be a better area to consider selling into than SPX considering the ongoing downtrend which has not yet been surpassed. So while the near-term trend is bullish, one could look to take profits on further gains this week and/or consider shorting above 43.50, as from a risk/reward basis, longs look unattractive going into March with prices still under this longer-term downtrend. 

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Semiconductors- SOX still trending higher, but finally getting to areas of importance which has held since peaking out last March. Similar to European ETF, IEV, the Philadelphia Semiconductor index, or SOX also lies just below important levels. Movement back up to 1385-1400 from 1364 still appears likely, so Semis still appear a bit early to sell into at current levels. Following another 3-5 days higher which gets over 1385, this would be a better suited Sell vs at current levels. Momentum remains positively sloped and this uptrend from late December remains very symmetrical in sloping higher. So given this sectors leading tendencies, it remains important to highlight that the current uptrend has not shown any evidence of peaking, but does look to be close to key levels, which are just 20-40 points above, and Demark indicators will signal exhaustion within 1-2 weeks. This points to an above-average chance of this stalling out into March at a one-year anniversary of last year's peak. 

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Transportation Breakout likely leads to additional gains- Transportation has been one of the driving forces in the Industrial move lately, but yet much of this has come from the Rails. The DJ Transportation Avg has officially exceeded the downtrend from last Fall as of last week, which puts this trend on better terms, suggesting that further gains should be likely. Stocks like CSX, NSC, and UNP have all enjoyed gains of over 9% in the last month, and despite some of the woes in stocks like FDX and UPS which have underperformed along with the Airlines, Transports look like a group to favor given this rally back over key resistance. Transports should have resistance at 11044 near December highs, and IYT still looks to trend higher to 200 from its current 190.

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Bloomberg Dollar index- The extent of the Dollar weakness in recent weeks is an important part of the larger thesis of why Emerging markets might outperform in 2019 along with Commodities finally starting to turn higher for intermediate-term gains. China has strengthened relatively to the US lately and it's thought that this strength can continue and might begin to outperform US stocks. Near-term, this Dollar weakness looks to persist and if 2019 lows are violated, this would also constitute a breakdown of this entire structure over the last year. On a development of this sort, one should consider intermediate-term Pound Sterling and/or Euro longs and also longs in commodities as an asset class that could give stocks some meaningful competition this year as an outperforming asset class. 

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Utilities have managed to engineer a much stronger comeback than many anticipated lately, as this group has turned in strong enough performance to rank fourth best over the last month and the 2nd best performing sector last week. So this recent outperformance during times of market strength is thought to be unusual and something to pay attention to. Technically speaking the last 4-5 weeks have given a snapshot at why further strength might be likely in this sector, as we've seen a move right back higher to test both prior highs in a very short period of time. Thus, when it seemed likely that the peak and selloff into December might bring about further intermediate-term weakness, this ability to snap back as quickly in recent weeks bodes well for an intermediate-term breakout back to new all-time highs. In the short run, there is some resistance directly above. However, this is thought to be temporary and any pullback should be used to buy with targets in the low 60's.

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Breadth much stronger than expected of late- Minor waning proved just temporary- Looking at weekly Breadth, this has risen pretty dramatically in the last couple months, and was thought to be something to keep a close eye on in terms of gauging whether this rally had any "legs" or whether just a minor bounce that should then give way to a move back to lows. As this weekly chart of the Summation index shows (the Smoothed gauge of McClellan Oscillator) this has gotten above all levels seen in the last year, and has reached the highest levels since 2016. Thus, recent strength has been remarkably broad-based in a manner that was initially thought to be very difficult heading into this year. Technically in my experience, breadth surges like this are an impressive guide to what could play out in the next 3-5 months. While momentum seems to be nearing near-term overbought levels, it's becoming increasingly clear that this rally might have more to go on an intermediate-term basis, either into late April/May, or into Late August before a more meaningful top.

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VIX getting down close to levels where it's right to consider owning implied volatility. VIX has now fallen off dramatically from December peaks and is within striking distance of levels that were important all of last year. While this looks to potentially have a final maximum flush down to 10 from its current 13.51, we can see that the area from 9.50-11 has largely held for the last three years. Thus, any further drop in implied volatility would likely constitute an attractive area to buy implied volatility for means of hedging and/or long-dated speculation on Vol levels rising from these depressed levels later in the year.

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Sentiment has gotten slightly bullish, but certainly not at extremes- Sentiment polls are worth highlighting, since bearish sentiment seems to have evaporated, as might be expected with a friendly FED and 17% rally in the last 8 weeks. Yet, DSI and Investors Intelligence readings still haven't lifted AAII Bulls all that dramatically over Bears. (American Association of Individual investors) Last week's reading was a 13% more Bulls than Bears. Thus, positive and a big improvement over the bearish readings from late December. Yet, historically it's only been when both AAII and Investors intelligence both showed readings +30% either Bullish or bearish to really make a difference.