Push back to new highs last week in SPX, QQQ keeps the near-term uptrend intact, while Equal-weighted S&P 500 and NASDAQ Composite also successfully achieved their own respective all-time high monthly closes to close out the month of February. Trends have proven far choppier in US Dollar, along with US 10-Year Yields, while Cryptocurrencies have been scaling new heights daily. Overall, I suspect that SPX is en route to ~5200 into mid-March and it’s necessary for SPX 5057 to be broken to have any concern about even a minor 2-3 day pullback. Bottom line, despite overbought conditions, it’s right to stick with this current trend given little to no evidence of trend failure.
I chose to focus on AAPL 1.57% instead of the normal S&P 500 chart as there’s far more to discuss technically, and as shown below, AAPL’s underperformance has been ongoing since last Summer.
While this isn’t an intermediate-term concern, and there’s ample evidence that “Magnificent 7” stocks can certainly carry markets higher without the aid of AAPL, it’s recent lagging has been noteworthy and something to keep an eye on in the weeks to come.
Technically, I feel that recent weakness on Monday in AAPL, which undercut the prior lows of the last few weeks, likely should pave the way for a pullback to challenge last October 2023’s lows which lie at $165.67.
However, despite the lagging lately, AAPL still trades in a very healthy consolidation within striking distance of all-time highs. Thus, the recent underperformance does not seem to be something that will be a concern, until/unless AAPL breaks three-year uptrends from 2020 lows.
Overall, I feel like AAPL makes sense technically near $166, and under this would allow for a probable brief move to $158-$160. However, I view all weakness in AAPL over the next month as likely making this stock quite attractive technically, albeit from fractionally lower levels.
Gold breakout likely to lift prices to $2500 into mid-year
The last couple of days of upward acceleration look helpful for Gold technically. This has helped the metal rise to new all-time highs, but yet isn’t garnering as much discussion as cryptocurrencies in recent days.
While gold prices have steadily lifted as real interest rates have fallen, the larger rally is thought to be potentially predicated on the Fed’s path for rate cuts and how quickly these take place.
The broader market certainly has priced in 75 bps of cuts for this year. However, the economic strength continues to push off the timing of the first rate cut.
Interestingly enough, despite long rates having pushed higher over the last two months, Gold and Silver have both begun to show technical evidence of bottoming out and rallying.
Gold’s push to new all-time highs arguably makes continued gains likely to $2500, a level which would allow this most recent rally from 2022 lows to be equal to the prior advance off the 2018 lows. (This level would target a level just over $2500.)
In my 2024 technical outlook I discussed how precious metals might rally sharply in the first half of 2024 before consolidating in the back half of 2024. However, part of this thesis was based on rates turning down sharply on the long end. (My ^TNX -0.96% target remains 3.25% for 2024, and this might be high, and rates might go even lower.)
Bottom line, I believe it’s right to own gold, and this recent spike to new highs should help prices begin to escalate to $2500, regardless of if the Fed postpones the first rate hike even further.
Materials sector breakout should bode well for absolute strength in the weeks to come
Given some of the outsized moves in the precious metals lately along with many other soft commodities, it’s right to take a close look at Materials to see if this might give any clues towards whether this sector could be poised to outperform.
In the short run, meaning over the next few weeks and next few months, I expect that Materials can outperform, specifically on an absolute basis.
However, as I’ll show in a couple charts to follow, the absolute charts do not suggest that Materials has bottomed out, nor that this sector will start to outperform the S&P 500.
Initially, we see a daily chart of the Equal-weighted Materials sector ETF (RTM), which has officially rallied above two former swing highs to the highest levels since early 2023.
This is a minor positive development and should drive price up to $37.50-$37.75. However, this area represents 2022 peaks and is thought to represent strong resistance.
Thus, Materials strength has achieved a minor breakout, but not yet a major breakout.
Materials sector breakout has not happened on a relative basis to SPX
As this weekly chart of the ratio of Equal-weighted Materials to Equal-weighted S&P 500 shows below, this minor bounce has a lot of work to do before thinking that the Materials sector is beginning to show outperformance vs. the broader market.
The breakdown in late 2023 took Materials stocks lower in relative terms to the lowest levels since mid-2020, nearly four years ago.
While the last few weeks have shown good relative strength as commodities have bounced, the larger downtrend from 2022 remains very much intact.
Thus, selectivity will be paramount in trying to choose stocks which might outperform within Materials.
My personal favorite stocks in Materials based on the strength of trend and positive momentum, are as follows:
CRH -1.25% , LIN 0.27% , SHW -0.39% , SUM, ECL 0.06% , VMC, LPX -0.55% , MLM 0.52% , EXP 0.05% , FRD -0.62% , RPM 0.28% , PKG -1.42% , STLD, and CE 0.91% . Others which aren’t yet near all-time highs but are worth watching as they rally off lows, are as follows: WRK, DOW 0.15% and ASH 0.23% . Note, while I didn’t concentrate on gold, nor silver stocks in my review, there are a plethora of good names within this space also.
One might consider the VanEck Gold Miners ETF (GDX 0.41% ) and/or the Silver Junior Miners ETF (SILJ 0.63% ) as vehicles which could more closely mimic the rise in precious metals stocks.
A strong breakout in the weeks and/or month to come above this existing multi-year downtrend would result in this group beginning to show more intermediate-term strength. At present, this looks like a short-term bounce only.
