Key Takeaways
- 1%+ bounce for US Equities seemed encouraging price-wise; Yet, breadth was negative and few sectors showed much strength outside Technology and Defensives
- Momentum still negatively sloped (MACD) on daily charts, while RSI not oversold. Index prices have not eclipsed key areas which would suggest immediate gains back to highs
- Ethereum’s Mkt-Cap Dominance breakout makes this one to watch into mid-December
Snapback rally for SPX has lifted this to official “No-Man’s Land” which makes for a difficult bullish call for follow-through heading into Tuesday. Downtrends over the last week remain intact & breadth was negative Monday given Tech’s outperformance while many others lagged. Equal-weighted indices like Value Line Geometric had broken down sharply under trendline support and this has not been recouped. Overall, rallies back over SPX-4703 will be necessary to have some confidence on this bounce, and meantime, one can’t rule out a retest/minor break of last week’s lows before a bottom is in.
Europe and most Equal-weighted US Indices still lagging badly
EuroStoxx50 daily charts have grown increasingly worse near-term given the extent of recent weakness. This is important for investors to keep a close eye on for those expecting an immediate snapback in US markets back to highs. Many times Europe and US will have largely similar patterns, but it pays to watch the times that Europe either shows exorbitant strength or weakness.
In this case, EuroSTOXX 50 has nearly given back the entire rally up from late September lows. The quickness of this pullback has turned momentum over quite sharply, and structurally this has suffered some technical damage, causing the uptrend to now morph into a larger consolidation range. Yet, overall, the sideways trend has largely been intact for most of 2021 and prices “should” find some support down near the meaningful multi-month trendline down at 4000. Then bounces into mid-to-late December are likely but will need to show meaningful strength to regain what’s been lost in the last week. Failure to do this, i.e. making a minor bounce, then rolling over to break this “white trendline” would cast an obvious negative on what could be in store for 2022. At present, support seems near, though difficult to forecast based on recent weakness.
Bottom line technically, in the case for both Europe and US Equity indices, momentum is negatively sloped but not oversold. Price deterioration has occurred as a result of last week’s damage and will need to be recouped on better breadth and participation to have confidence of a move back to new highs right away.
Ethereum continuing to gain ground within Cryptocurrencies
It’s worth pointing out that Ethereum managed to close at the highest levels since early May on its Market-Cap Dominance chart, shown below. This large base being exceeded should offer an attractive risk/reward for Ethereum to outperform on a bounce into December, technically speaking.
Simply put, the art of achieving such a large breakout on its Dominance chart bodes well for outperformance and gains in Market cap in the weeks to come. Thus, while ETHUSD along with BTCUSD and many others have shown 15-20% or greater losses in the last couple weeks during a time when many Cryptocurrencies tend to outperform, the coming weeks seem a bit more promising technically given this breakout. Overall, longs are preferred at current levels in ETHUSD, looking to add on daily closes above 4552 and further above 4867 which should help lead this up to 5587.
In general, the recent pullback in many Cryptocurrencies seems to be losing steam momentum-wise, which bodes well for gains into mid-December, technically speaking.
