Sector Rotation and Style Shifts Galore – BTC, GOLD, TNX, DXY!

4 years ago 1047 views 7 min read

Mark Newton, CMT

Managing Member / Founder

ML Newton Advisors LLC

Friday Technical Video- 8/6- Discussing SPX, Sector rotation- Yields, Dollar, Bitcoin and GOld

https://stme.in/ZnRQgaamaf

Key Developments

Important Sector rotation taking place SPECIFICALLY given today’s strong Jobs number. Interest rates turning up, Dollar turning up, and Prec metals turning down. These moves should all persist in the short run

Financials, Energy, Materials outperforming. Financials in particular are breaking out with banks like BAC, JPM, GS, MS, showing excellent strength. MS and GS are best

Given that these sector rotation moves happened SPECIFICALLY today with rates and USD pushing higher, I expect them to continue and Fins, Energy, mats outperform

Precious metals rolling over in very sharp decline. Given that the trend for Metals has been choppy and range-bound, today’s breakdown ALSO looks to continue in the short run and I would hold off on looking to buy dips too quickly in the metals, despite what seems like a good opportunity for many who like to buy weakness. Technically I see GOLD going to 1680-90 and Silver potentially reaching 22-22.50 before stabilizing

Technology and Heatlhcare the two outperformers for the month of JULY, have weakend today. Near-term we might see better performance out of Fins, Energy, but do not expect much mean reversion just yet out of Tech

Bitcoin looks to be making a minor breakout today above a key trend from Spring highs. This is a bullish development and I like being long BTCUSD, ETHUSD for further strength near-term.

EEM rolling over and this looks like a Short/underperformer with USD turning up- One should hold off on overweighting EM until Dollar rise has run its course. China weakening also which means here also, premature to expect much stabilization just yet

S&P and NASDAQ< DJIA breaking back out to new highs to end the week. A good move though DeMark related SELLS are now in place for SPY, SPX, QQQ and while not confirmed, might limit near-term upside

Thus, I do feel S&P gets to 4455-70, but yet cannot make the call for 4600+ based on this week’s movement

Momentum and breadth have been diverging, and while this isn’t a reason to sell, it also is worth knowing that this breakout might face some challenges, and specifically if Tech starts to weaken more on rates pushing up

TNX- Important move in rates today and expect this does lead TNX back to 1.55% and potentially up to 1.75%. This looks like the start of the move

Move in #Financials looks important and DIFFERENT from what we’ve seen in recent weeks and constructive given 12% within SPX– This breaks the trend over the last 2 months, & we’re seeing sharp gains in many banks which are breaking out of 2 month consolidations

UTILITIES breaking out given RYU’s push above highs of this consolidation. This is a good development and should lead higher to 120 for RYU

XLU the traditional SPDR ETF also making same move and likely gets to the low 70s.

I’ve listed a couple of my favorites below that I like buying

NVAX- Novovax- 20% selloff should represent opportunity. I had lightened up into earnings and like buying dips as this company is on the forefront of a good Malaria vaccine

77% effective at stage 2, next closest to them is 37%—- NVAX vaccine 93% effective vs Delta and boosts performance of Flu vaccine !

Admittedly with the delay in submitting for EU approval though, this might be dead money for a couple months, so I would keep in an intermed. Term long basket

But if this slips under 177, then its right to hedge and/or not buy dips anymore as this will postpone a recovery

My own thinking is this filled the gap and should hold and the price reaction this morning is an overreactoin

$AEE Ameren is also a Utility i am going to add to LONGS and like alot here- MIght not seem sexy folks, but this is what’s working- Rotation OUT of Technology & healthcare today and into the Utes which have slowly but surely been strengthening- I’ll buy at 87.18 with Targets at 90 and then 100- Stop at 83

LNT- Alliant Energy is a Technical long within Utilities space, which is breaking out to new highs- Sharp rotation today OUT of Technology and Healthcare and INTO Financials, Utilities- 60.85 with target at 64, 68- Stop 58.42

BITCOIN- Short-term gains likely- Ive been slow to endorse buying this 50% pullback in BTC given that momentum turned so sharply negative and my weekly cyclces still showed a chance for BTC to have a negative 2021

But near-term, this move is important and positive and should lead to follow-through

I think BTC goes to 47.50 to test former lows. I feel ETHUSD goes to 3100.

BTC breaking a key trendline from its 2021 peak today and price action is constructive. I have taken a position and will be inclined to trade out of this likely in late August

However, IF 47.5k is exceeded, this certainly is a STRUCTURAL improvement for bitcoin and weekly momentum likely will start to improve enough to get me more onboard

For now, a tactical long trade only.

Gold and Silver rolling over sharply- these won’t be something to immediately buy into as this looks to be structurally damaging and can lead a bit lower, despite this being a seasonally bullish time

One should hold off and await a test of 1706 or 1670-90 for buying dips in GOLD futures, and/or GLD, IAU, SLV, AGQ, GDX, NUGT