Despite Friday’s drawdown, US Equity indices are higher on the week with the NASDAQ 100 having enjoyed the best week of the year. Stocks like AAPL -1.66% broke out to new 2023 highs, while other important highly weighted ^SPX -0.46% and QQQ -0.89% constituents like MSFT 0.88% and META -2.22% hit new multi-month highs.
While sectors like Financials and Energy have sold off sharply in recent weeks, both of these groups are nearing attractive support and are thought to likely stabilize and bounce post FOMC next week. Healthcare also has been starting to show some minor strength after recent weakness, and this group looks attractive.
Interestingly enough, there continues to be a very vocal debate on earnings revisions and valuation and the markets reluctance to sell off down to levels that would satisfy many of these Fundamental “bears.”
Sentiment has grown quite negative in the short run as was discussed yesterday. This is a key part towards thinking that back-month seasonality for March could mirror its normal pre-election year seasonality at a time when many remain negative, but Technology is working very well.
Near-term price action remains constructive given Thursday’s advance above SPX-3928, and the fact that Friday’s decline has not undercut yesterday’s lows, while momentum gauges like MACD are close to turning positive.
Overall, a move up to test 4025-50 looks likely in the short run, and breaking this downtrend from February would help SPX join the NASDAQ in showing much better near-term technical structure. The next few trading days with FOMC on deck early next week could prove important as a positive catalyst.
Gold has reached the highest levels since Spring 2022
To follow up on my 2/13/23 note, “Selloff in Metals should conclude by late February” Gold has now broken out to new multi-month highs in Friday’s trading.
This move back over early year highs should drive Gold up to challenge $2070-2075 in the short run into mid-to-late April. This is an area of strong resistance which has held twice thus far and could cause resistance.
If/when long interest rates show more substantial evidence of breaking down, then it would be right to project much higher for Gold. At present, rates likely will bounce in May/June which might make that period difficult.
Overall though, Gold’s momentum has begun to turn sharply higher, and monthly MACD has just broken the signal line and is bullish for the first time in over two years.
Upon a successful weekly close over $2075, it would be right to target $2500 which is the first meaningful upside target above $2075.
Gold and silver stocks look attractive, and the Vaneck Gold Miners ETF GDX -1.40% looks likely to rally to $36.50 initially, which represents a 61.8% Fibonacci retracement of the decline from 2020 peaks. Additional intermediate-term resistance lies at $38-$39 which would line up with trendline resistance from the 2020 peaks. Bottom line, gold and silver along with gold and silver stocks look appealing technically given the rolling over in real yields.
Silver has begun to turn up as well, albeit at a slower pace
Silver also looks to have bottomed, and should begin a rally back to its first meaningful upside resistance near $24. This level has held from the early 2021 peaks and looks important on a first retest.
The event of surpassing $24, however, would allow for a rally back to the high $20’s which also has some serious resistance near Spring 2021 peaks.
Interestingly enough, Silver has been lagging Gold for months now, and this precious metals spike has not caused Silver to break out of relative downtrends to Gold.
Thus, Gold remains the preferred precious metal to consider owning at the current time. If/when Silver/Gold ratios begin to turn higher, than Silver would be given more preference.
Utilities look stretched, and pullbacks likely vs SPX
One interesting dynamic is the extent to which relative charts of Defensive groups like Utilities and Staples have shown pretty consistent peaks and troughs that have coincided with opposite peaks and troughs with the SPX.
The lows in relative performance of Equal-weighted Utilities ETF (RYU) relative to the Equal-weighted S&P 500 ETF (RSP -0.32% ) by Invesco, has consistently provided excellent counter-trend signals which have coincided with market turns in recent years.
Last November 2022 Bottom in Utilities along with early February’s low both coincided with times that US Equities have made minor peaks in price.
Utilities peaked out as a group, relatively speaking back in late September 2022 along with late December 2022 which also proved to be very close times when SPX bottomed.
Interestingly enough, the recent uptick in relative strength for Utilities since early February is now showing evidence of potentially peaking out, coinciding with a TD Sell Setup on the ratio chart of RYU vs SPY -0.46% . This is an early warning, but should signify that Defensive groups like Utilities could be readying for a pullback following the group’s steep runup since early February.
