|Monday’s Technical Video (8/31) did not contain charts, but contains 5 mins of Discussion|
Thursday Technical Webinar Replay Link- 8/26- SPX, Sector Rotation, Cycles in SPX, Bitcoin
My TD Ameritrade Interview from Monday, 8/9 w/ Oliver Renick
Replay Link- “Cycles in SPX, TNX, DXY, Crude, Gold, Bitcoin” 7/22- Thursday Technical Webinar- 25-30 min overview
SPX – (3-5 Days)- Bullish- Expecting rally up to 4545-60 in S&P and evidence of cyclical exhaustion and DeMark based “sells” will be complete likely on further strength Wednesday- For those looking to try to pinpoint an exact peak, this might center on Wed-Friday of this week and one should consider selling into strength above 4550 on Wednesday if given chance
FEZ (3-5 Days)- Bullish- A challenge of mid-August highs looks likely Wednesday-Friday of this week at 48.35, and might get to near 49, but doubtful that June highs will be exceeded
Technical Long/Short Focus list 9/1/21
Top Technical Developments
1) Further upward progress into 9/1-3 looks likely for US Equity indices, with targets on SPY near 457.5
2) August positive for the 7th straight month for SPX and higher last 14 of 17 from March 2020 lows.
3) Financials outperformed all other sectors in August but yet Utilities still outperformed Technology. It’s thought that Defensive groups should offer outperformance in Sept/October
4) Small caps nearing resistance and likely face the same wall near former highs that has held since March. Transports, meanwhile, have begun to turn down and DJ Transports still lower by 1500 points from the Spring
5) Tuesday’s stabilization in Treasury yields looks important and can lead to further bounce in TNX.
6) Improvement in the laggard sectors remains the biggest technical achievement for August as rebound in Financials, Industrials, Discretionary has helped market breadth at a time it was sorely needed. Yet, Percentage of stocks above 20, 50 day m.a. still only 70% while it was 95% in April even as indices have pushed higher
7) Cycles show possibility of trend change around 9/2, which would line up with last year’s peak and has various relationships to prior highs and lows. At present a bit more strength looks likely for US indices this week.
SPX – Can this trend extend further in the months ahead? The odds are against Sept/Oct being positive for 5 important reasons: First, momentum has gotten quite overbought on NDX 100 just as prices have neared weekly and monthly Bollinger band resistance. Monthly RSI on NDX is now at an 84. Second, seasonality remains negative in September into October of this year given the combination of several prominent market cycles ((as we’ve discussed the combination of a 7-year Shmita cycle combining with the post Election year cycle) ( Furthermore, indices are nearing an important 1 year anniversary from last year’s peak along with a 6 month low to high cycle from March that should peak the first week of September- In addition, the 32 calendar day Low to Low cycle over the last four months should bottom again near Sept 18-19th at a minimum, showing indices nearing a high risk period over the next 1-2 weeks for a peak.)) Third, breadth is still way down from highs seen in April, despite a rebound in the last couple weeks. NYSE Advance/Decline peaked out in June along with Equal-weighted Indices like Value Line peaking. While the move up in Financials has been impressive and this group along with Discretionary and Industrials might eventually all push back to new highs, it has not happened just yet, and groups like Tech now find themselves in the crosshairs yet again from South Korea. Fourth, DeMark exhaustion shows meaningful exhaustion across most timeframes starting this next week at marginally higher levels. Fifth, Junk yields have widened at a time that the VIX has diverged positively and not moved to new lows, even on Index strength back to new highs. As discussed, from a larger perspective, there HAS been no weakness to be bearish on an intermediate-term basis, and will naturally require SPX to selloff along with NASDAQ and DJIA below August lows at a minimum. However, for most traders looking to “pick spots” to tactically reduce risk who haven’t already, one should eye Sept 2-3 or Sept 10-12 for a near-term peak. Bottom line, trends remain near-term bullish and i do expect a push up to 4550-75 into Wed-Friday. Yet one should not be surprised at a trend reversal this week, and yet again the next 1-2 weeks look to be a time to pay attention if/when Technology starts to weaken.
Signs of stabilization in Yields after August’s positive close for TNX gives hope for a further bounce in yields in the months ahead after the steep decline in recent months. Movement back over 1.40% should lead to 1.50% and over that would allow for the much anticipated push up to 1.75-1.80%. While this might take time, we see that daily support near the Ichimoku Cloud has held in recent weeks and some definite evidence of yields holding after their decline. Overall i expect a bounce between now and year end in Yields even if it takes time in September if/when Equities start to turn down. This should directly benefit Financials, a group that should be favored as yield curve steepens.
Transports need to be watched carefully as this leading sector isn’t showing the kind of follow-through higher which was thought to be necessary for this market to exhibit more signs of health heading into September. The DJ Transportation Average remains down around 1500 points from its Spring peak and any move back down under 14400 would warn of the start of more pronounced weakness.
ML Newton Advisors LLC
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