I’ll be on FOX BUSINESS news tomorrow morning, Friday 8/9 at 8:20 am, EST with Maria Bartiromo
The early week stabilization looks to be a work in progress, and choppy consolidation might very well continue in the days ahead before a rally gets underway back to highs. At present, despite Thursday’s abnormally high volume, positive breadth rally, more progress will be needed to turn trends and momentum more positive. As discussed in recent days, I feel that lows are likely in place for now after this sharp decline from mid-July. Equal-weighted S&P 500 and Equal-weighted QQQ remain in much better shape, following just a scant 3% decline from all-time highs in recent weeks. US Dollar and US Treasury yields should be ready to turn back lower, SPX should turn up in a more direct fashion after August expiration. Bottom line, the risk/reward favors a return to growth and Technology bounce after the recent pullback to support. However, make no mistake, some technical work is needed to surpass the current downtrend from mid-July, and I expect this to give way as US Indices work back higher into the back half of August into September.
SPX bounce continues to be a work in progress, and as the “Dog-days of Summer” draw near and many remain on Summer vacation, it’s not unusual to see above-average volatility and exacerbated movement. This August is no different, as we’ve followed up one of the worst days of breadth of the year (Monday) with the best day of breadth of the year, as indices rebounded sharply.
Unfortunately, it remains difficult technically to call for any uninterrupted push back to new highs right away. The pattern looks choppy and unstable near the lows, and it’s necessary to see a strong push back up above the 50% retracement levels (which lines up with late July lows near 5391 in SPX.
As shown below, this will be truly what’s important in helping momentum and trends turn more positive following the above-average volatility we’ve seen in recent weeks.
While my cycle composite calls for higher prices into mid-September, it also calls for a choppy August which might still require some backing and filling until 8/19 before turning up. If this were to materialize it means that the next week very well could prove unsatisfying and more volatile than many would like to see.
However, the key level for SPX remains 5119 on the downside, and a breakout back above 5395 would help this trend to begin to push higher in a more direct manner.
S&P 500 Index
SOX intra-day chart shows why more work is needed
Despite the Philadelphia Semiconductor Index (SOX) having climbed nearly 7% on the day, it remains underneath Wednesday’s intra-day highs.
I’ll include some comments which I posted Thursday through Flash Insights (For those who don’t have access to this intra-day, I would suggest downloading the Fundstrat/FS Insight App)
SOX is now up more than 5.5% off its lows from yesterday and is approaching “resistance” targets for today.
While it’s great to see the degree of rally off these lows, the larger weekly momentum picture remains negative, making it essential to keep a close eye on technical structure, and wave counts until sufficient upside progress has occurred.
Moreover, S&P, QQQ and SOX are up near highs made Tuesday of this week along with last Friday, making this an area where prices might stall in the short run. Additionally, we see that the decline from Tuesday’s peaks took an impulsive, sharp five-wave structure that casts a bit of doubt on the ability of an imminent breakout of this week’s highs.
We’ll see. At present, this SOX chart looks to be nearing a difficult spot after today’s early bounce, and I suspect some backing and filling might be likely into next week before this rally continues. Overall, while I am bullish for gains into mid-September, I suspect that some choppiness is possible until August expiration before a strong move higher.
In regard to the SOX structure, a move straight over 4739 would help to alleviate these concerns but there looks to be resistance between 4680-4739 and that might happen this week. Further resistance could happen near 4801, which would help to fill the gap from 8/1/24 while the larger downtrend from July currently intersects near 4990. All of these levels are important, and getting above each of them is a “work in progress” so to speak.
Any pullback lower to 4551 could be important, but movement down under 4520 would be a concern and lead all the way back to yesterday’s lows and slightly under before a more serious bottom.
Overall, I am expecting a rally back up to at least 5600 in SOX into mid-September. However, given a sharp upward one-day rise during a time of ongoing weak intermediate-term momentum, it’s right to expect some stalling out heading into next week before prices can push higher.
SOX
Growth looks compelling vs. Value after this minor dip
Looking at the Large-cap Growth vs. Value ETF ratio chart from Ishares Russell 1000 Growth ETF (IWF 0.81% ) vs. IShares Russell 1000 Value ETF (IWD 0.10% ), the recent sharp breakout seen in early 2024 from May into July has been completely retraced in recent weeks which pulled back to its pivot area of this prior breakout.
This is a very appealing area to consider Large-cap Growth after just a minor one-month pullback in Growth vs. Value.
As this larger chart shows, the technical pattern remains quite compelling at current levels from a risk/reward perspective.
Much of this mirrors the trajectory in Large-Cap Technology, which might be expected. Many Tech stocks like AMZN, GOOGL, NVDA, MSFT all look to be at/near important support and likely provide a bounce into September. This likely can help the growth trade snap back.
See this chart below, which makes IWF look very attractive technically vs. IWD.
Russell 1000 Growth
Copper remains in a sharp downdraft; I suspect lows are drawing near, but might occur at $3.80-$3.85
This decline in Copper has proven far more severe than expected in recent months, and the weekly cycle chart had projected a multi-year peak in Copper starting in August. (Not shown)
In the short run, I’m expecting a minor decline from current levels, but expect that Copper likely bottoms near 3.80-3.85 before turning back up in the month ahead.
The first important area of resistance lies near $4.33, but the ability to get back above this (4.33 represents the lows based on the generic Copper Futures contract) would allow for a much stronger rally back to highs into September and/or October.
I’ll discuss the weekly cycle chart in the weeks to come following a bottom and bounce in Copper. At present, it’s right to be on the lookout for a possible bottoming in price.
Overall, I expect a short-term bottom in Copper by late August followed by a sharp rebound. My timing and price levels have to do with daily DeMark counts, lining up with a larger area of key trendline support.
While Copper is increasingly looking like an appealing risk/reward, it still looks to have downside in the short run, and the momentum and trends remain quite negative, at present.
Copper Futures
