The near-term uptrend remains very much intact despite some mild stalling out which happened to begin nearly on schedule for a mid-month reversal. As was discussed a few weeks ago, US indices have had the propensity to reverse course mid-month over the last five months, with mid-August, and September proving to be particularly important for mid-month peaks. However, October, June and July turned out to be lows. Thus far, Technology, Discretionary, Materials and Energy have shown some mean reversion. Yet, three of the four groups above were leaders in 1-month performance, and look to be merely consolidating. Overall, given the lack of 10-Year Treasury yields turning back higher aggressively along with the fact that uptrends from mid-October and early November remain very much intact, a rally back higher to 4120 still looks like the most likely scenario between now and December before stalling out again. While the market going forward should prove far choppier than most bulls will like, there remain attractive stocks breaking out among quite a few sectors and one must simply be a bit more selective.
Energy still under pressure, but weakness likely proves short-lived into end of November
Energy still looks to be weak in the short run, and Monday’s reversal doesn’t give much conviction just yet of any type of larger low being in place.
Daily charts show the break of October lows in front month WTI Crude futures. This took prices down to multi-month lows before snapping back to close the day well off earlier lows. Fossil Fuel energy has lagged performance over the last couple weeks, but yet remains quite strong on an intermediate-term basis.
Energy as a sector has not broken trends vs SPX to suggest more intermediate-term weakness is necessary. Technically, the near-term oversold conditions coinciding with some bullish Crude cycles suggest that rallies into mid-to-late December remain a good likelihood, vs. an immediate snapback to the $60’s.
Overall, until Crude can start to work its way back higher, Alterative and/or Solar Energy is likely to be preferred over traditional fossil fuel-based Energy stocks.
Short-term price action would suggest that despite the ability of prices to have recouped former lows that were violated Monday, a bit more weakness ultimately looks possible before lows are truly in place. One can look at prices stabilizing between the low $70’s and low $60’s before bottoming and turning back higher. As discussed, I’m not inclined to view this year’s peak as being all that meaningful in WTI Crude. Given the lack of breakdown in Energy vs SPX on a sector level, I still find this sector attractive in which to buy dips on weakness.
Technology has stalled out, with no heir apparent to take its place
The push higher into mid-month happened to peak exactly near a key downtrend from January 2022 peaks and happened to occur at a precise one-year anniversary from last year’s US Stock market highs in NASDAQ, DJ Transportation, Russell 2000 (which occurred mid-November, not January 3)
Given that rates appear to be trying to stabilize and any close back up over 3.91% allows for a push to new highs, it’s difficult having faith in Technology outperforming in the short run.
This sector proved to be one of the strongest gainers in the last month, among SPX GICS Level 1 sectors on a rolling one-month basis.
However, until technology can break out, it’s logical to consider that this sector likely has stalled out in the short run and outperformance might be difficult to come by.
Technically one could still make the case structurally that a rally up to challenge August 2022 highs might be possible into early December. However, this should be used for profit-taking given the current positive correlation with US Stocks and Treasuries.
Monster breakout from my UPTICKS list ( Long in Monster Beverage MNST)
Monster Beverage (MNST) has finally produced the much-anticipated technical breakout that looked likely last month after this had begun to stabilize at a much higher level of lows than back in Spring 2022.
While technical breakouts are always quite difficult to time, the symmetry of this pattern was impressive, and it’s long-term structure was quite bullish technically. Monday’s breakout officially makes it possible to call this a Reverse Head and Shoulders pattern, given the successful move back above it’s “neckline” (resistance connecting former peaks since 2021)
Its Monday 11/21 close above 11/4 intra-day highs of $100.41 looked important and bullish, as this successfully exceeded August 2022, January 2022 peaks, along with August 2021 and April 2021 peaks.
Volume expanded to the highest levels since last Tuesday. Although volume might have seemed subdued, volume on the NYSE for Monday proved to be quite compressed anyway given the short holiday week.
My stated technical resistance for MNST is $114 on a breakout. Thus, this is the area listed in my last UPTICKS report from 11/7/22. I’ll look to adjust my support higher to $95 given that this is higher by +9.68% since inception on 10/5/22 and was added at a price of $92.18.
