SPX and QQQ at new all-time high territory has not yet been followed by similar movement from Russell 3k, Value Line Average, and DJ Transportation Avg, and this divergence will be important to concentrate on in the weeks ahead. Technology remains an outperformer after its recent breakout while Financials are starting to play “Catch-up”. Meanwhile, defensive sectors like Utilities, Staples are all starting to show evidence of hitting support, and likely are close to turning higher. Breadth has been waning in recent weeks while US Dollar and Treasury yields have begun to press higher which likely could bring about an upcoming consolidation for US Equities. At present, trends are bullish and trend reversals require a close back under 1/12/24 peaks to have even short-term concern. (SPX-4802.40)
I’ll save any further rehashing of the near-term Equities trend until there is additional evidence of either a breakdown under SPX 4802, or some evidence of counter-trend Exhaustion signals arriving upon a push up above 4930. Until this happens, the near-term trend is bullish, but looks to be nearing resistance.
As this week comes to a close, it’s worth studying the performance of the main US Equity sectors, and as can be seen below, Technology’s outperformance has been slowly joined by strength out of Financials.
However, thus far in Year-to-Date (YTD) terms, only four sectors out of 11 are positive for 2024: Communication Services, Technology, Financials, and Healthcare. Seven other sectors are still negative, despite the sharp rebound in Equities.
Thus, while some evidence of mean reversion has slowly started to happen in sectors like Consumer Discretionary and Industrials, these will need to begin to show more strength to have conviction that a broad-based rally is getting underway. Healthcare’s positive gains for the year only materialized this past week. However, XLV remains under key resistance that has held for the last couple years and remains a formidable level.
Overall, given Value Line’s Equal-weighted Average still under last year’s peaks, and Russell 3000 having not yet broken out to new highs, this market has some work to do. However, I do suspect that the March-August period should bring about a broad-based rally for 2024.
S&P 500 Sector ETFs
I’ll be releasing the new UPTICKS list next Monday or Tuesday but wanted to relay a couple of the new additions, which are technically sound and look appealing.
American Express (AXP)
AXP is quite appealing technically following Friday’s (1/26/24) breakout back to new all-time high territory.
The company reported record full year revenue and a promising 2024 Earnings forecast which promptly led to a surge back to new highs.
This is attractive given the spike in volume to the highest levels since December 2023. I’m expecting a push up to $260, and feel that any dip back down under $200 would make this an even better risk/reward technically.
In my experience, it’s always important to monitor stocks that are exceeding prior highs which were made 1+ years ago which occur on above-average volume.
American Express Equity
Netflix breakout also makes this quite appealing for gains up to $700
Similar to AXP 0.15% ’s breakout, NFLX also made an important constructive move technically when it exceeded its consolidation highs near $500 from late December 2023.
While the short-term momentum readings have certainly gotten oversold, NFLX looks appealing to own for further technical strength up to challenge all-time highs near $700 from late 2021.
Any pullback into February would make this more attractive from a risk/reward perspective. However, I do not see NFLX getting back down under $525 in the weeks ahead.
It looks right to own at current levels for those with long-term perspectives, and an ideal area of support might materialize near $530-$550 on any minor stock market weakness in the weeks to come.
Overall, this stock’s progress along with AXP 0.15% were important enough to mention in today’s report ahead of next week’s January UPTICKS release.
Netflix Equity
Tesla’s pullback still warrants stabilization
Tesla has managed to decline down to an area I was considering following this week’s earnings report. However, while price has reached short-term support, time factors do not yet signal a low could be in place.
Moreover, my cycle composite that I shared earlier this week cited that late February into early March should be ideal from a time perspective.
Thus, despite TSLA 0.66% having become seemingly oversold, I’m hesitant to think this stock has bottomed.
Technically speaking, it’s often rare that high-volume “down days” end up being “the low” on any meaningful decline. Normally these are Elliott-style wave 3 moves. Even if a minor bounce develops, a further decline normally is quite possible.
My remarks from earlier this week on symmetry revolved around a decline likely reaching the bottom of this recent trend channel. That level is below $180 and lies near $160. So $160 certainly looks possible.
Furthermore, until/unless DeMark-related downside exhaustion signals appear, this might require a move down to $152, which would equate to testing levels near last April 2023 lows.
Bottom line, I do expect that TSLA should be an attractive risk/reward opportunity to buy dips into this Spring. However, I cannot say with any confidence that the stock should bottom technically merely because it’s gotten to $180-$185 which I wrote about earlier this week.
I expect additional deterioration over the next month. However, this should present opportunity.
Tesla Equity
