^SPX has now declined 7 of the last 9 weeks, and while a larger rebound does lie ahead, the near-term remains tricky and volatile. Looking at Friday’s action, the sudden about-face doesn’t completely negate the positives of Thursday’s sharp rebound, but it’s vital that SPX hold above 3577 into next week. Below that level argues for a full retest and partial break of this week’s lows, which should take SPX down to 3450-3475 before a rebound back to 3800 gets underway. Overall, picking spots to buy dips in this decline has proven rather precarious, as the extent of the decline in recent weeks has not yielded much if any real stabilization.
Thus, rallies are being quickly given back, but yet as hourly SP500 Futures charts show below, prices remain at/near late September lows and as I’ve discussed, the broader market has held its gains better than Technology and the price action in QQQ might suggest. Into next week, this volatile 200-point SPX range will be key to keep on the front burner. Movement back over 3712 would lead to 3800-50, while any violation of 3570 likely brings 3450 into view. However, I’m still of the opinion that rates and US Dollar are close to peaking, and that should serve as the technical catalyst for a push back into Technology and into Growth.
Dollar/Yen looks very close to peaking out
Cycle composites of USDJPY show prices very close to peaking out and a sharp pullback should get underway within the next 1-2 weeks which helps the Yen rally into the month of December and potentially further into 2023.
DeMark counter-trend exhaustion indicators like TD Sequential and TD Combo are also coming into confluence on many timeframes that suggest this steep rally should be nearing conclusion.
Momentum based on gauges like monthly RSI are officially above 2014 peaks to the highest levels in more than two decades. The risk/reward for staying short the Japanese Yen at current levels looks sub-par, and I anticipate a coming reversal.
WTI Crude looks to be in the final stages of its pullback
In the last week, Crude has shown some consolidation following its above-average rally starting in late September. Crude rose from the mid-$70’s to over $90, or 22% in just 10 trading days, and has now given back nearly half of this move.
Wave structure suggests that a final pullback to the low $80’s is upcoming and the area at $82.50 would allow these two waves to prove equal in length.
Overall Energy has shown little to any real intermediate-term damage relative to the SP500 as well as in absolute terms for the most part. While a near-term pullback did get underway which was discussed early this past week, this hasn’t done sufficient damage to make one avoid Energy.
Energy remains a top sector to favor, and I like owning fossil fuel and alternative energy names at current levels for a move higher into year end. Further declines in WTI Crude down to $82-$83 would make many stocks quite appealing from a risk-reward basis.
On an intermediate-term basis, many cycles project gains in WTI Crude back to new high territory, which should make WTI Crude and Energy stocks a group to favor at current levels for an intermediate-term time frame and on a short-term basis on a bit more weakness in WTI Crude over the next 1-2 weeks.
This daily chart of front month WTI Crude futures is shown below detailing the successful trend breakout and the possible Elliott-wave count. I suspect that the benefits of the late September rally far outweigh the recent weakness and dips should be bought.
ON Semiconductor broke listed support, but I’m inclined to hold
As might be expected while trying to unroll a long-only technical list during a violent downward tape, one of my longs has already broken down under support levels given in last week’s support.
ON Semiconductor fell sharply on recent weakness in semiconductors, but as can be seen, barely any intermediate-term damage has occurred. I am choosing to hold longs and will simply await chances to buy in the low $50’s, or await a near-term rebound back from near current levels which I believe should help to carry this stock back to new highs.
New Technical support levels lie near $52, but I don’t see the benefit of abandoning this stock if I have faith in the semiconductor industry to rally back, which given multiple DeMark indicators lining up, seems likely to me between now and year-end.
Going forward, when stocks violate support, I’ll address and make the determination whether to keep the stock or whether to get rid of. At current levels, I still like ON, and will hold the stock as one of my top Technology stocks within Semiconductors.
