Bitcoin technical strength could spur on Crypto rally into July
- SPX and QQQ minor pullback has done little to no technical damage
- Semiconductors still preferred within Technology into July for outperformance
- Solar Energy’s recent underperformance vs. Energy warrants patience
Trend bullish-Minor weakness near highs of the recent trend channel doesn’t look too serious. Pullbacks should be buyable for additional strength into late June.
SPX showed some brief evidence of stalling out to kick off the post Expiration shortened week which was discussed briefly last Friday. While SPX fell roughly -0.50%, it was a bit more broad-based with RSP -0.70% falling more than 1%.
However, little to no real weakness occurred to change the existing trend and Large-cap technology still held up better than expected within SPX.
It’s thought that a breach of 4300 would need to happen to cause even minor concern about SPX starting to turn lower, while the bigger “line in the sand” lies at 4200. While many have the urge to try to sell into this rally, neither SPX nor QQQ have given much of a reason to expect much selling pressure thus far.
Semiconductors likely to continue leading within Technology
Semiconductor names have been one of the stronger areas within Technology in the last couple of months following the breakout above late 2021 highs in relative terms to Equal-weighted Technology (Chart shown is VanEck Semiconductor ETF (SMH) relative to RSPT -1.81% , the Invesco Equal-weighted Technology ETF).
As shown below, this rapid period of outperformance in recent weeks has not generated any evidence of upside exhaustion, either on a weekly basis (shown) or a monthly basis (not shown).
Given that weekly DeMark counts (per Symbolik) will require at least another three weeks of strength before these appear, it’s likely that Semiconductor stocks still show broad outperformance into July before stalling out (and likely consolidating overbought conditions).
At present, Semiconductor stocks remain the best part of Technology, technically speaking, and far preferred over Software names.
Solar Energy weakness makes this group even weaker than Equal-weighted Energy
Equal-weighted Energy has just broken down to new multi-week lows vs the Equal-weighted S&P 500, which makes selectivity extremely important in the near-term.
Solar Energy, (TAN, Invesco Solar ETF), however, has fared even worse, and both Enphase Energy (ENPH -2.09% ) and SolarEdge Technologies underperformed substantially within the S&P 500 during Tuesday’s session.
As this relative chart below shows in TAN relative to Invesco’s Equal-weighted Energy (RSPG -1.83% ), there has been largely no preference between the two groups since last Fall.
However, there’s been a mild downtrend underway in the relative performance of TAN vs. RSPG -1.83% since April of this year. Thus, Solar Energy is a relative laggard and will need to break out above this ongoing downtrend to offer any evidence of outperformance. At present, Solar energy remains weak as part of a steadily weakening Energy sector.
As discussed last week, the Weekly cycle composite of WTI Crude shows the potential for weakness into August before a bottoming out in Crude oil.
Bitcoin technical breakout likely spurs on cryptocurrency rally
(Below is a small excerpt of some technical research I typically provide every weekday to our Cryptocurrency team, led by Sean Farrell.)
Bitcoin’s breakout above its 50-day moving average looks significant and positive technically as something which could allow for additional upside in the weeks to come. This area at $27k also lines up with a prominent downtrend line which has held prior rally attempts on two separate occasions in recent months from the peak in mid-April 2023.
While moving averages can often prove difficult as timing mechanisms for risk assets, it’s notable that the prior peak for BTC in late May along with a late April swing low both occurred right at its 50-day moving average. The larger positive development revolves around the two-month downtrend being broken and this should lead to a coming push back to test and exceed 2023 highs near $31k.
Bitcoin’s rally over the last four days has proven stronger than Ethereum, and ETHBTC’s breakout attempt into early June proved short-lived before reversing course. Overall, BTC looks to be one to favor in the short run, and daily closes above late May peaks at $28,452 should lead to a challenge of $31k before another push higher to $34-$36k. Bottom line, BTC’s breakout looks bullish, and should lead to additional gains in the days/weeks to come.
