Musical Chairs Rotation Back Into Value Possible in July
|Replay- 7/1 Technical Webinar- What does Growth say about 2H 2021?|
Replay- Thurs 6/24 Webinar- “10 Top Concerns heading into end of Q2”
MY CNBC interview 6/16 on choosing AMZN vs GOOGL
MY CNBC interview 6/16 on the IPO Market and technical thoughts on Coinbase- COIN
SPY – (3-5 Days)- Bullish- SPY is now right near 432 target- Stallout possible Friday, but wait for proof- I fully expect a temporary stallout can happen Friday into next week given short-term overbought conditions, DeMark exhaustion and a key early July cycle- Though pullbacks should prove short-lived and buyable into next week and until we get that weakness, i am staying bullish and will just buy dips.
FEZ (3-5 Days)- Bullish for bounce- While FEZ has lagged the US rally of late, its still thought that a rally up to 48-48.50 is possible, and one should be on the lookout for if this DOESN”T happen also on a break of 47 which would be far more negative.
Technical Long/Short Focus list 7/02/21- Stops on closing basis only
|Top Technical Developments |
1) While a strong 1st half normally leads higher in 2H we have to be aware of greater volatility given the drop in momentum. Greater than 12.5% returns has happened 16 times since 1954 and 12 of those times, or 70% of the time the back half of the year is also positive.
2) The Key driver of market performance, Technology and specifically “FANG” has gotten overbought similar to April and February peaks. It’s thought that yet again, musical chairs might take hold where Tech pulls back in July and Financials and Energy recover.
3) US Dollar pushing to the highest since early April should allow for strength into mid-July-This should lead to Precious metals weakening near-term but close to a bottom by mid-July. Key will be late March highs at 93.43 in DXY
4) Large-Cap Technology and Discretionary could start to wane and give way to strength in Financials and Energy again in July. Tech has camouflaged the move in broader markets after best 1st Half since 2009
5) Half of all sectors were DOWN over the last month, something that most are choosing not to concentrate on. Financials, Materials, Industrials, Staples and Utilities were all down more than 1% in the last 30 days. It’s UNLIKELY that Tech strength can continue.
6) Treasury yields have broken down per 10-year yields, yet 5 and 30s have held up relatively better. It’s thought that this divergence should translate into a yield bounce into mid-July. For now, further Treasury gains (yield weakness) looks likely into early July
7) Energy trounced other commodities in IH, though Natural Gas nearing initial resistance and Sugar, Cotton and Coffee all look primed to push higher in the weeks/months to come. Precious metals could weaken on Dollar strength into mid-July but should be bought on weakness in 2nd week of July.
8) Slow divergences are building with NDX, SPX not being followed by many of the broader indices, as well as Europe and Asia. However, this should be monitored carefully in the weeks to come for evidence of it worsening or improving.
9) Emerging markets have actually held up fairly well vs Developed in recent days, despite the rip in the US Dollar. It’s thought that Dollar gains at this point do prove temporary and then reverse but 93.43 is key for DXY near late March
10) Homebuilders and Pharma Favored along with rebounds in Financials and Energy are likely in July. Note that Energy largely lagged the move in WTI Crude
US Market indices nearing initial resistance- QQQ and SPY generating exhaustion signals right as “FANG” Basket is back at overbought levels and QQQ has been down 2 straight days. We’ve arrived at a key energy zone for early July, so the next couple trading days will speak volumes about course for July- On evidence of reversal, look to buy dips next week, expecting pullback to prove brief. QQQ is now right near the 355-357 resistance and we see TD Sequential and TD Combo counter-trend exhaustion lining up along with SPY being complete likely on Friday on daily, 60, 120, 240 min charts just as 432 target is in reach for SPY. Tough being short, but i fully expect some kind of stallout happens. If this DOESN”T happen and markets just grind straight up through these levels, then mid-July will be the next target, specifically July 14-22. I like staying long, but buying all dips.
OIH showing divergence with WTI Crude, and peaked out in early June. What does this say about our Energy rally right as WTI hits 2018 peaks in Futures? Crude has screamed higher in recent days, but Energy has lagged performance, higher by just 1.09% in the last month. Both XOP and OIH still have a chance to push higher, but 233 is key for OIH, and above would produce acceleration. Similar level for XOP lies above 100.07 on a close.. Equal-weighted Energy RYE looks more attractive, and at 46.35, should push up to 48.50-49 into mid-July.
Builders on the comeback trail. We’ve seen Lumber fall nearly 60% in the last 2 months, but reaching oversold levels and now XHB is slowly but surely turning back up, right at a time of seasonal strength for this group. XHB broke its downtrend a couple weeks ago and expect this shows further strength into mid-to late July . This should be an area of focus and outperformance and our stock CNR should benefit from housing turning back higher after a minor pullback.
ML Newton Advisors LLC
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