Minor breakout in Solar Stocks on Manufacturing Push
Key Takeaways
- Monday’s initial gains fade, leaving S&P still within last week’s range; meanwhile, Bitcoin and many Cryptocurrencies gained sharply today.
- Treasury yields pushed higher to just under last month’s peaks while hedge fund data shows futures positioning falling to the lowest levels in over a year.
- Solar stocks gapped higher with Biden attempting to promote solar development.
Equity markets got off to a good start to kick off the new week, with Monday’s gains initially offsetting the weakness from last Friday before fading. While optimism faded a bit during the day as Treasury yields lifted, patterns still seem to support a push back to new weekly highs before some much-needed consolidation. Near-term technical targets lie near 4285 up to 4315 for SPX, while QQQ could hit 318, then 322 before pulling back. Elliott patterns (in my view) still seem to support this being a choppy 4th wave consolidation off the 5/20 lows and a final push up to new weekly highs above last week’s peaks being the most likely scenario. While a strong push higher in US Dollar and yields likely will affect Equities negatively, this still seems early and Equity trends remain bullish in the short run with leadership out of Industrials, Discretionary and Financials.
Hedge Funds positioning in Treasuries has dropped to the lowest levels since January 2021
10-Year leveraged funds transactions show hedge funds having flipped their Futures positioning to bearish, erasing the net long positions that have been present since January of 2021. While 10-Year US Treasury notes along with 5’s and 30’s are all pressing back to new monthly highs, it’s thought that this sudden shift to bearish might translate into Treasury weakness proving short-lived into June’s FOMC meeting before reversing course. Friday’s inflation report seems to be an area of key focus for traders, coming this Friday. CPI is projected to come in at 8.3% annual rate, unchanged from last month.
Technically speaking, I expect 10 and 30-Year Yields to push back up to monthly highs into this month’s FOMC meeting, but also anticipate that a larger Treasury rally is right around the corner. This severe dip in Sentiment should be watched carefully and/if DeMark-based exhaustion signals materialize in the weeks ahead on further strength in rates on TYX, it should set up for a turn back higher in Treasuries (lower in yields) later this month.
At present, I’m expecting the path of least resistance for rates in the next 1-2 weeks should be higher and would use yield strength to add duration and/or buy Treasuries over the next few weeks.
Solar stocks surge on reports of POTUS-led push for solar manufacturing
President Biden seems ready to invoke the “Defense Production Act” to provide support for US-made solar panels. This Cold War-era law was similar to what President Trump utilized to provide support to many coal plants. While Biden’s comments of a two-year freeze on new tariffs might be seen as friendly towards environmental groups, many solar panel makers who are struggling to compete against Asian rivals remain unconvinced.
Overall, despite this being an issue that still seems unresolved given uncertainty about the impact of taxes on past solar shipments, many solar stocks experienced above-average gains during Monday’s trading. The Invesco Solar ETF, TAN, successfully broke out above its downtrend from last Fall.
While TAN still looks to be trending lower on an intermediate-term basis and will need to close back up above $85 to truly jump-start a more concrete intermediate-term rally, I expect this meaningful downtrend to be challenged in the weeks/months ahead.
Bottom line, TAN rally might face resistance into mid-June, but will increasingly be more attractive as intermediate-term trendlines near $85 are exceeded. Stocks like ENPH-2.46% , SEDG-2.77% have been leaders in the space while DQ-2.64% , RUN1.29% have rebounded sharply in recent days. FSLR0.43% is a laggard at this time, but gains back up above $76 on a close should lead back to the mid-$80’s initially
Bitcoin follow-through encouraging for further gains
Bitcoin’s rise this morning (Monday 6/6) should kick-off the start of upward acceleration in BTCUSD, which likely reaches near-term technical targets near $37k, then $39.7 before showing some consolidation into late June. 5/30’s lift to multi-day highs on above-average volume helped BTC finish positive last week after nine straight negative weeks.
As shown on daily charts, the initial rally followed by just minor consolidation and then lifting back higher back to multi-day highs is a technically bullish factor structurally which should help this rally continue. Despite the ongoing downtrend which has not been broken since late March and weekly momentum still negative, technical trends should begin to improve based on a combination of bullish cyclical projections combined with the short-term constructive technical structure.
Finally, the ability to climb over last week’s $32,375.81 intra-week peak should drive further upward acceleration this week and longs look appealing, looking to buy dips. Any move back under $29,232 would postpone the rally but is unexpected in the short run.
More from the author
Articles Read 1/2
🎁 Unlock 1 extra article by joining our Community!
Stay up to date with the latest articles. You’ll even get special recommendations weekly.
Already have an account? Sign In eecd73-3e2f8b-ca9521-769ace-5090bb
Already have an account? Sign In eecd73-3e2f8b-ca9521-769ace-5090bb
