Technical Strategy Video:
Key Takeaways
- Two-day equity decline insufficient to cause technical damage; SPX looks to have bottomed at first Gann target 4630; Expect push back to highs into next week
- Treasury yields and US Dollar turned up sharply Wednesday following Strong CPI print. Dollar hitting highest levels of 2021 likely causes further near-term upside for DXY
- Energy temporarily weak and fits with November seasonality for WTI Crude;
Breakdown in ^SPX hasn’t done too much damage technically and managed to reach 4630, signifying the first real area of possible support. Wave structure of the minor pullback still looks corrective from an Elliott-wave standpoint, which should create buying opportunities for a push back to new highs into next week. 4681 important on upside, and over should lead to 4765. Only a move under 4550 would create a more bearish near—term view if this happens ahead of prices pushing back to highs, which for now, looks doubtful.
US Dollar strength should prove temporary, and expect strong overhead resistance near 96
US Dollar pushed up to the highest levels of the year on Wednesday following a much hotter than expected CPI print.
Weakness in Emerging markets and commodities is likely with the Dollar pressing higher, but technically it’s likely this creates opportunity to buy dips into late November/early December.
Upside technical targets for DXY lie at 95.50-96 which is near 50% retracement of last year’s decline. Elliott structure shows this advance to be the final push up in an ABC type rally which began back in early 2021.
Gold stocks jumped to multi-week highs, yet upside looks tougher from here
GDX 3.38% , the VanEck Gold Miners ETF, rallied to the highest levels on a closing basis in nearly two months on Wednesday. This broke minor “neckline” resistance of what appears to be a reverse Head and Shoulders pattern, which makes Gold stocks worth monitoring in the days/weeks to come. However, downtrends from last year remain in place, and the strength in the US Dollar and Treasury yields should act to prevent Gold from making too much more progress. At present, Gold has progressed higher as the Yield curve has fallen. This doesn’t look to be as much about Gold being an inflation hedge, as it does Gold successfully pushing higher as yields have been falling. This looks to be nearing completion, technically, and expect strong resistance near 35-35.50. Once the Dollar starts to roll over, embracing precious metals and metals stocks will get a bit easier, but this might be postponed for now. Technically oriented traders might be wise to utilize stops at 32 for GDX longs.
Energy weakness should prove temporary. Energy suffered nearly 3% losses on Wednesday, and ETF’s like OIH 2.31% , the VanEck Oil Services ETF, fell to the lowest closing levels since early October. Seasonally, November tends to be a tough month for Energy and WTI Crude, so one can allow for a bit of near-term weakness as part of a longer-term Bullish Energy call without doing any damage to the intermediate-term trend. OIH should face strong support at 198.50-200 to buy dips on any further weakness into mid-November, as this weakness looks temporary, technically speaking.
