Rally looks to be back on track, for Equities, and for Crypto

Technical Strategy Video (Recorded Thursday, October 28th):

Key Takeaways

• US equity trends took a turn for the better Thursday despite the low GDP print; Structurally this looks likely to lift SPX up to 4634 near-term
  
• US Dollar decline looks to be temporary as the EURUSD surge casts doubt on the market believing Lagarde’s dovishness- EURUSD resistance at 1.17
  
• Bitcoin rally likely completes this recent consolidation and projects up to near 73k
  
• Apple and Amazon post—market selloffs do little to alter their technical structure

Strength in SPX on hourly charts shows this consolidation to be likely complete, for now given Elliott wave structure; Rally up to 4634 looks likely into early November before any backing off. Bigger picture, SPX should rally to 4700-60 into mid-December technically, but not as a straight line. Momentum and breadth remain positive on daily charts while still waning on weekly ones.

1-2 Punch hurts the US Dollar in the near-term; Euro surges to new weekly highs

• Thursday’s ECB meeting looked to have finished on a bit more hawkish note than the ECB intended. Markets still look to be casting doubt on Lagarde’s dovishness
• Lagarde acknowledging that inflation might take longer to tame, coupled with her announcing preemptively that PEPP should end in March 2022 resulted in EURUSD spiking
• Technicals remain negative on EURUSD and prices could find strong resistance near the existing downtrend line as wave structure suggests this October bounce is counter-trend

As seen below, EURUSD spiked to the highest levels of October (and DXY plummeted in reciprocal fashion) Technically, it’s tough to make much of this move overall despite it being quite strong in Thursday’s trading. Technically this should encounter resistance in the next week right at/slightly above 1.17 before turning back to new monthly lows.

Bitcoin rally coinciding with broad-based rally in Cryptocurrencies and should signal strength along with Equities into mid-November

• Bitcoin bounce could have completed a counter-trend (ABC Elliott-wave) decline in recent days and should now push up to new high territory with targets at $72,410
• Regaining $63,733.93 would confirm this move back to new highs, and should be a chance for longs to add to positions
• Only on a pullback under 56,425 would postpone rally and allow for further weakness

After a very sharp one-month rally in Bitcoin from 40k to 65k in 30 days’ time, or 65% gains from 9/21 to 65k (65,990 to be exact) or roughly 2% on avg per day, (2 units of price per unit of time) we’ve seen a mild pullback that now looks complete.

Elliott-wave structure seems to indicate a completed three-wave decline that ended Wednesday 10/27 and should now be turning higher. Regaining 63,733 would serve as confirmation to this and suggest pressing longs are correct for a move up to $72.410. This target equates to a 1.382 Fibonacci extension of the rally off July lows and right above a 50% Extension of the late September surge, projected from Oct 27. (71.597 is this exact target)

Market Breadth improving in Equities short—term, yet intermediate-term concerns remain

Much has been made about the bump in near-term breadth and the percentage of SPX issues above their 20-day moving average (m.a.) has more than doubled from late September. Yet the percentage above their 50 day and 200-day still require some serious upward progress to have more faith that this rally is becoming more broad-based. As the chart from OPTUMA shows below, with Percentage of SPX members above their 20-day m.a. in Light Blue, Percentage above 50-day m.a. in Yellow, and Percentage above 200-day in Red, the near-term improvements still haven’t been strong enough to lift many stocks which still are down much more from their 200-day m.a. than was the case in early September at our recent market peak. Percentage above 50-day now stands at 56.63%, below those peaks from mid-April at 95%, and percentage above 200-day is at 69%, below the reading in the mid-90’s also in mid-April. This will continue to be monitored.

Looking at our two big heavyweight stocks within the Large-cap Growth Technology complex that represent part of “FAANG” or AAPL-1.22%  and AMZN-2.56% , we see generally an improving technical picture in recent weeks, despite the lackluster patterns over the last year.

Both Stocks fell in Thursday’s post-market session, AAPL citing Supply constraints being worse than expected, while AMZN posted lower than expected third-quarter sales and signaled that a tight labor market and supply-chain disruption might weigh on earnings.

Technically speaking, AAPL still stands a decent chance of rallying back to highs into November/December to test/exceed former all-time highs at $157.26. Daily patterns show a slowly ascending trend channel with rising highs which looks to have found resistance in early September at exactly the right levels. Until this changes, it will be right to still favor this trendline being effective resistance again. Meanwhile the Elliott-wave structure of the September decline is quite corrective, and a three-wave decline. The resulting rally since 10/4/21 has been far more “impulsive” in Elliott—wave Speak. Thus, a push to new highs is likely, even if not in a straight line. After market weakness is right near weekly lows at $147.62, often an important area to watch. Overall, AAPL requires a weekly close under $138 to have much concern. Until then, dips should be bought technically for a push higher to test $157-160

Amazon, meanwhile, looks largely like an EKG (electrocardiogram) over the last year, with very little net change. Momentum has improved since early October but yet the stock failed to break prior weeks highs headed into earnings Thursday. Subsequently, its weakness also brings this down to near weekly lows, in this case above 3297.70 with post-market trading at 6:00 pm at $3321. While some might have understandable intermediate-term concerns about momentum given the rapid run-up from March 2020 to September 2020 giving way to nearly a year of sideways price action (Sept 2 2020 high close of 3531.45 is still fractionally above the Oct 28, 2021 close of 3446.57), this pattern isn’t bearish until/unless March 2021 lows are violated near 2881. We’ve seen on countless occasion that AMZN can have the tendency to move sideways before pushing back to new highs. Overall, near—term support lies at 3176 and near-term resistance is at 3550. Until either side is broken, it pays to just consider this pattern neutral for now, technically.