The ability of SPX and NASDAQ to close up near its highs of the week is certainly thought to be a positive, not a negative as prices officially broke out of their long-term downtrends on a weekly basis for the first time since the market top.
Importantly, this rally certainly seems like a lot more than just short-covering. Sectors like Technology have continued to gain ground over the last few weeks and Tech is now the third best performing sector on the year, nearly doubling SPX’s performance.
Upside targets could materialize near 4147 into next week’s FOMC. Yet, the technical structure has improved, and the wave structure seems to indicate that any weakness likely prove temporary until potentially mid-February.
Most of the mean reversion plays of sectors from worst to best are certainly getting stretched in the near-term. Furthermore, it’s doubtful stocks within the casinos or Airlines area of Discretionary will be able to continue lifting uninterrupted.
However, at present, most of the “risk-on” sectors are working well. Meanwhile, the Defensives like Utilities and Consumer Staples have continued to underperform and Pharmaceutical stocks have joined in this weakness in the short run.
Overall, I suspect that SPX likely faces some near-term resistance near 4100 with S&P front month futures probably reaching 4147 without too much trouble before stalling out next week. But it will take a decline under 3949 to give a warning about the possibility of more weakness. At present, it seems more apropos to concentrate on trying to stay long, and buying dips when given the chance.
Chemicals have improved in the short run; This sector could show some relative strength within Materials during 1H 2023
The chemicals sub industry within Materials deserves a special look given this group’s ability to have successfully exceeded its downtrend from early last year. This is a bullish development and should lead the S&P 500 Chemicals industry Level 3 index (S5CHEM) back to new highs in the first half.
Stocks like DOW and LYB just made bullish breakouts back to new monthly highs this week. This is constructive price behavior, and both of these look attractive for gains in the days/weeks to come.
Intel still in poor technical shape; Movement up above $30.50 is necessary before thinking this has bottomed
Intel continues to show above-average underperformance among its peers, and its dismal earnings report caused a decline on above-average volume that keeps its recent range very much intact.
Daily charts show what appeared to be a successful breakout late last year of the ongoing downtrend. Yet, INTC failed to gain much ground following its breakout, turning back lower to immediately challenge lows.
The Subsequent rally attempt also looks to have failed to break that key $30.50 level before turning back down on Friday.
Overall, until/unless INTC can regain $30.50, this stock is likely to lag the Semiconductor space a bit longer. Key support for INTC lies at $25, while resistance is at $30.50. One should not expect too much volatility out of INTC until either side of this consolidation is broken.
Bitcoin’s rally still needs a lot more strength before being able to weigh in positively about its intermediate-term prospects
Following up on this past week’s Bitcoin comments from my 2020 Annual Technical webinar, it’s important to note the areas of key importance which could help to improve BTCUSD ‘s structure.
I noted that $27.50-$29k looked to be important during the Webinar this week. This is based on the following technical reasons: First, Bitcoin’s weekly Ichimoku chart shows a huge area of overhead resistance right near $29k. Given the size of this Cloud formation, it’s expected to present some real resistance on gains in the weeks ahead on any rally to that area.
Additionally, this represents the prior lows from Summer 2021. As the saying goes in Technical analysis, prior support lows likely become resistance on a retest. Thus, until BTCUSD can exceed this level, it’s thought that this area represents important resistance.
While my target for 2023 is $40k for BTCUSD, it’s notable that the 50-week moving average is moving quickly to cross below the 200-week moving average, a so-called “death cross”.
Overall, my cycle composite shows strength until April which should translate into continued strength, making dips likely buyable. Once consolidation has occurred, likely from 29k in April down into late Summer, it will be appealing to buy dips for a run-up into year-end. Bottom line, the short-term trends and momentum are certainly bullish. However, the weekly charts and momentum require some technical progress before they’ll turn bullish. As with most assets which have deteriorated 60-70%+ off their all-time highs, rallies initially often can be tactical and short-lived. Building a larger base from which intermediate-term rallies are possible often takes time. In Bitcoin’s case, 2024 could turn out to be a much better year than 2023. However it still looks likely that BTCUSD could nearly double by end of year, given it’s technical improvement in the short run.
Tesla- Have we missed the lows?
I held off on expecting Tesla to bounce as sharply as it has in recent weeks, and still maintain that the broader charts are more negative than positive.
Often when a stock or asset declines more than 50% off the highs, bounces don’t typically go directly from low to high right away.
Base-building is a key part of the process when expecting more of an intermediate-term rally. Thus, seeing a stock with strong negative momentum on weekly or monthly basis with short-term overbought conditions isn’t normally the ideal time to be bullish.
Looking at Weekly DeMark charts, no weekly TD Sequential or TD Combo 13 countdown signals were present at its lows. All were 2-3 weeks away, and made me think bounces would be sellable.
Cycle composites on Tesla tell a similar story, and suggest that the stock likely won’t be able to sustain this recent rally past mid-February without consolidating a lot of recent gains.
The key cycle in question concerns the 107-day cycle in the short run. When combining this with a 53-day trading day cycle and a couple other shorter-term cycles, we see that TSLA’s prior peaks and troughs were all caught by these short-term cycles.
This looks to be peaking out again in early February and weakening down into May. Overall, I suspect that TSLA should not get back up above $200, despite the recent strong surge off the lows.
While I have more doubts on the likelihood of an immediate retest of lows, I’m still fairly confident that TSLA pulls back in some manner into the month of May. This could turn out to be a better area to buy dips than at current levels.
