Technical Strategy Video:
Key Takeaways
- Prices approaching important Nov highs for SPX and NASDAQ, while DJIA, EUROSTOXX50, Value Line Geometric Avg., Russell 2k all lagging
- Treasury yields have begun to make good progress in turning back higher, with TYX in particular exceeding former yield lows that should result in further yield spikes
- Multiple sectors are now approaching Trendlines and/or former highs that should cause some resistance and a “Back and Fill” of recent gains
Wednesday’s recovery has now propelled SPX back to November peaks. This certainly is a positive for SPX and NASDAQ in the bigger scheme of things. The main issue lies with prices trying to eclipse this resistance as several other sectors are nearing similar levels and/or Trendline resistance, while the broader-based gauges of Equity Markets haven’t moved up as sharply. Overall, SPX remains far more positive than Russell 2k, or DJIA, or Value Line. It wouldn’t be surprising to see some consolidation before this rally can continue.
Europe’s STOXX50 Index has struggled along with the DJIA and Value line to make a similar move back to highs.
As seen below, this pattern isn’t nearly as strong, and only the Non-Tech dominated indices look similar. Most of these peaked out in May/June timeframe and have gone largely sideways.
To have proper confidence of a broad-based move back to new highs, it will be essential to see momentum and breadth start to turn up a bit more sharply and for indices like the Small Cap Russell 2k and Mid-Cap index to start to advance in a bit more robust fashion.
Technically, it is a bit of an issue to have daily momentum gauges still negatively sloped on many Benchmark indices, while hourly is overbought just as prices are reaching former highs. The next couple weeks should resolve this, one way or another.
It’s right to embrace a broad-based move back to new highs, but at present, many indices and sectors look more apt to stall and possibly reverse in the short run, despite the bullish seasonality.
Three other possible near-term concerns: First, DeMark based exhaustion could trigger Thursday 12/9 on SPX, SPY directly following last week’s Weekly “sell” confirmation using TD Combo and TD Sequential. Thus for the first time, daily exhaustion is joining weekly exhaustion. Second, a few short—term cycles remain “choppy” until around 12/24. Thus, it wouldn’t be at all surprising to see this rally hold for now and consolidate. Finally, hourly Elliott-wave patterns are about to complete five waves higher from early December on hourly charts. Thus, it should be unlikely that markets “rip” from here near-term. Though consolidations should prove buyable over the next 1-2 weeks. Bottom line, the next 3-5 days will certainly decide quite a few things and it is important not to get too complacent on this recent rebound.
Healthcare and REITS stole the thunder Wednesday. Healthcare nearing Short—term Resistance
This Equal-weighted Healthcare ETF is nearing similar trendline resistance which is being seen in Technology after Wednesday. Thus, some work needs to be done before initiating “new” buys at current levels. Overall, stocks like ABBV, PFE, DGX, ABT, UNH, MCK and LLY are tops, technically within this space, in my view.
Bond yields, meanwhile, rallied pretty sharply in recent days, and TYX in particular made a bullish move back above prior yield lows. This likely results in further Treasury selling/Yields lifting in the days ahead, and it looks right to own TBT, and/or TMV technically into year-end
