Equity trends remain bullish, yet SPX is close to several projected targets near 5900 which should slow this rally down as it nears the end of October. This looks to be happening this week, though there is still no real evidence of a meaningful downturn in SPX just yet. Overall, the drying up in breadth and volume seems to be a warning sign to pay attention to following an extended run. Technology has underperformed lately and it’s thought that the path for Equities between now and mid-to-late November could be lower given the combination of cyclical and sentiment-based issues. While intermediate-term bullish thesis remains very much intact, arguably it’s doubtful that US Equities continue to push up into and post-election without any consolidation. Moreover, November’s weakness should represent a short-term correction only, not the start of a larger decline. Risk/reward seems poor in the short run, and SPX seems unlikely to exceed 6000 right away but could find resistance near 5900-5935. Meanwhile, QQQ should find resistance at 503-505.
The stalling out in US equity indices since 10/14 hasn’t led to much movement in either direction, yet is slowly leading breadth and momentum to begin to stall out after the runup from early September.
Monday’s trading action was a bit more negative than what the -0.18% end result for SPX might have implied, as six sectors were lower by more than 1%, and XLK’s positive finish took away from the fact that all 11 S&P Sectors finished negative on an Equal-weighted basis. RSP -0.42% , the Invesco Equal-weighted S&P 500, was lower by -0.85% while SPX finished down just -0.18%, a huge disparity. Moreover, the NYSE Advance/Decline showed around 3/1 bearish market breadth.
However, as the daily SPX chart shows below, this choppy pattern isn’t necessarily bearish just yet, but a pullback under its 10-day moving average likely would kick off some additional selling ahead of the US Election.
Thus, undercutting SPX-5820 should be a near-term negative development that leads down to 5713 while over 5878 would allow for a possible short-lived push higher to 5925-35.
Watching carefully for when SPX makes its first five-wave decline from the peak will be important towards suggesting the selloff is underway.
S&P 500 Index
SPX daily cycle composite suggests November could prove to be a consolidation period
The daily SPX cycle composite suggests that SPX is nearing its first real test since the prior July 2024 peak and starts to top out and trend down throughout November in about one week’s time.
Given that weekly DeMark exhaustion signals are now present for Equal-weighted S&P 500 (RSP -0.42% ) along with below-average bearish readings on Sentiment polls such as Fear and Greed, AAII, and Equity Put/call ratios, it looks like a period of consolidation might be in store.
Prior peaks using this composite did signal a Spring 2024 peak along with a July peak that resulted in weakness into August.
The current downturn in this composite could allow for a 5-7% decline into and after the US Election before a holiday Q4 rally gets underway.
Overall, the weekly cycles for SPX remain bullish, so this daily cycle composite simply shows a minor setback for US indices before joining the weekly cycle in projecting higher into 2025.
SPX Daily Cycle
Treasury yields look to be near short-term peaks after initial bounce from September lows
Monday’s rise above 4.142% in ^TNX 0.76% represents the likely final push higher of the first move off the September lows, which should be nearing technical resistance and turn back lower within the next week.
This bounce looks to be close to reaching resistance off the September lows for the following reasons:
- Very visible five-wave advance from its 9/16/24 bottom.
- Approaching 50% retracement of its decline from April 2024 (50-61.8% is important).
- Downtrend line from April intersects near 4.21%.
Overall, this likely means that the advance in yields should face strong resistance and reverse in November. However, given that this advance looks to have occurred in a five-wave move higher, pullbacks likely will still result in yields pressing back higher into the end of 2024 following a small pullback next month.
Bottom line, yields should stall out between 4.18-4.30% and begin a retracement of potentially 38-50% of the recent bounce since last month. Thereafter, yields should begin another five-wave advance up to 4.40-4.55%.
When that’s complete in 2025, a decline back down to 3.00-3.25% looks possible.
US Government Bonds 10 YR Yield
Bitcoin looks to have held resistance, for now
BTC still has some work to do before it can be truly proclaimed to be “breaking out”. As daily charts show of this pattern from earlier this year, Bitcoin looks to have stalled out near July highs and has pulled back to multi-day lows today, which gives credence to this former high as being significant. Additionally, the downtrend from Spring 2024 peaks intersects right near $70k, so I believe this combines with prior July peaks to represent a meaningful area of resistance. As seen below, this connected March 2024 peaks with prior breakout attempts from May, June, and July.
While exceeding September peaks is thought to be a constructive technical development, the larger pattern remains Neutral, not bullish. The ability to surpass late July highs at $70,016 is what’s needed technically to help BTC -2.66% begin a larger move higher. Given that US Equities might show some consolidation in November, I suspect that a larger breakout might be postponed until after the election.
However, the intermediate-term view is quite positive given that prices have traded largely range-bound near all-time highs for over six months. The ability to make successive weekly closes above $70k should help to jumpstart intermediate-term momentum and allow BTC to make a run back to all-time highs into the end of the year. At present, however, I’m skeptical that BTC would be able to push higher aggressively if stocks show weakness in the coming weeks. Pullbacks should afford very attractive buying opportunities in the low to mid-$60 range into mid-November.
Bitcoin/U.S. Dollar
