Mark Newton: Thoughts on Markets 21st July 2021

3 years ago 1385 views 6 min read

Mark Newton, CMT

Managing Member / Founder

ML Newton Advisors LLC

Wednesday’s Technical Video- 7/21- Whats changed, and what’s not after today’s bounce-

https://stme.in/KNBZuaaecb

The Equity Market has proven resilient and NOT rolled over as quickly as I thought it would heading into today.

I made this decision based on

1. No change in VIX term structure- ((Front mth VIX was still well below back month futures , & typicaly we DO see inversion prior to a low- Not really even a 2 std deviation move, so unusual for market to turn down sharply and then rise equally as sharply with momentum negative and no real fear ))
2. My interpretation of Elliott wave structure which one other Service confirmed as still being a bearish bounce
3. Demark exhaustion in place for hourly and daily in most- and in some cases weekly
4. Negative momentum & then a sharp bounce into what I felt was resistance
5. Late July bearish seasonality
6. Meaningful trend breaks in important sectors like Financials, Transports, along with Small cap IWM trend deterioration. AS of mid-day Wednesday, SOME of this weakness and trend damage has started to reverse.

But I don’t think 2 days helps to change trends back to bullish and straight back to new highs, personally and important to watch the next couple hours carefully

Main Developments and/or Technical price action to pay attention to :

-Financials have reclaimed former lows from last week- (Doesn’t turn trend bullish, but a temporary positive)

-Transports have risen UP to, but not OVER the downtrend from May

-Small cap-IWM has in fact recouped former lows like Financials did- Over 222 would be a positive for this group

-Yields have pushed up for the 2^nd straight day (though arguably here also, will take much longer to have confidence about a TY selloff and yields moving up

-Signs of minor EM stabilization- Some China stocks rallying, EEM looks to have held former lows for now

-WTI Crude has bounced.. recall that equities and crude both lost ground at the same time and now Crude up to a critical make-or-break

-QQQ is lagging DJIA and SPX today but a second day of good breadth

SEASONALITY suggests Today and late July tends to be quite negative-

Today actually had an excellent chance of being down based on some of the strongest seasonality studies going back 70 years

Those certainly aren’t working today- This is a table from Stock Traders Almanac

Of all the days of the year. July 21 typically is only up 38% of the time and in the last 20 years has only been UP 19% since 2000- by far the weakest day of all of July

So today is running counter to what history says “should” happen. Though any given day , one would argue.. is tough to have an accurate opinion.

S&P has gotten above initial resistance that was thought to hold, so important to recognize that.

The wave structure SEEMs to be more impulsive than corrective also on this rally.

Overall one cannot be negative OVER 4370, which gives us about 25 points for this to play out and turn down to consolidate
over 4380 will lead to 4400-4450.

QQQ- Nasdaq 100 actually HAS lagged and not doing as well as S&P nor DJIA.

As mentioned, Financials have reclaimed prior lows and pushed back higher, something that was thought to be unusual and not happen right away.

OVER 60.50 near upper end of this resistance, would in fact lead to a test of highs, so important to note the area of upside significance.

FOCUS LIST CHANGES

I am removing DOCU, SHOP from longs- taking profits, and adding PLCE to shorts.

NEW Technical short- Childrens Place- PLCE- 86.47, playing for 70 initially & will use 92.50 as stop- Love the breakdown on heavy volume and now snapback to base- Good to sell into this bounce, expecting this turns back lower in the days/weeks ahead- SHORT.

$UVXY This VIX Futures ETF has now finally completed its TD BUY SETUP on hourly charts using DeMark tools- I have to stop out given my 29.30 as of end of day which was written in Focus list- Some might wish to hold down to 27.50. but under 27.50, one cannot hold. For the next two hours, much depends on this being able to reverse higher. A few things DID line up yesterday to suggest buying, but the bounce has proven stronger than expected right now, and this has not yet turned up- If stopped, I will find another area to attempt getting long this again.