I continue to see the US stock market as being attractive, technically speaking, and do not feel sufficient risk is there to warrant a selloff at this time. While price action has been a bit choppy in the last couple weeks, there remain precious little other evidence with regards to frothy speculation to excessive valuation measures that would warrant a major selloff. Rallies up to SPX-5350-5400 look likely into mid-April before a consolidation gets underway. Treasury yields and US Dollar should have limited upside after this bounce, and both look close to rolling over.
Tuesday’s gap down to multi-day lows for SPX on the heels of the breakout in bond yields still failed to do material damage, and as of 4/2’s close looks to be holding the level of trendline support from the uptrend line created by the early January 2024 swing low.
While nine sectors finished down on the session with breadth finishing at around 3/1 negative, SPX managed to show a late day rally that helped to recoup some of the early selling. Only Discretionary, REITS, Healthcare and Technology finished down more than 1% on the session, while Energy was higher by nearly +0.80%. However, I view the late day strength as being constructive.
Overall, while Tuesday’s SPX price action did temporarily trade intra-day under ^SPX 0.54% 5200, the index successfully rallied to close the day over 5200 and hold its larger uptrend line. Bottom line, in the bigger scheme of things, the two-day decline has not changed any of the current thinking about Equities having a good likelihood of rallying into mid-month. Support on any further weakness should come in near 5160, but likely proves short-lived.
Most of the recent day rotation seems to have occurred out of Technology and into the commodity space, and both Energy and Materials have outperformed Technology in recent weeks. Meanwhile interest rates have bounced, but this has not adversely affected the move in precious metals, nor WTI Crude Oil which have trended sharply higher.
Overall, I find it difficult to sell Technology to buy other sectors at this time. However, Energy and Materials are technically sound sectors at present which maintain good relative strength. My feeling is that Technology is close to bottoming and should push higher in the weeks ahead.
This daily SPX chart shows prices hovering near this area of uptrend line support from early January 2024. Given just two days of selling pressure, I think it’s difficult to make much of a bearish case, specifically given the late-day bounce in US Equity indices.
S&P 500
Treasury yield breakout should prove temporary, and does not change the thinking that a rolling over in Yields is due
Technically I was surprised to see 4.35% exceeded on Tuesday. However, yields briefly grazed the 50% retracement ratio of the prior decline from Fall 2023 peaks before pulling back sharply into the close.
It’s important to note that even if TNX does manage a temporary rise to 4.45-4.55%, the technical structure of this bounce since late December 2023 looks corrective in nature.
Thus, I do not expect to see this bounce make much further headway before stalling out and rolling over in the months to come. (Note, this seems to be the opposite of current CTA positioning as well as current sentiment given recent economic strength.)
However, this bounce in yields looks clearly choppy and overlapping technically and from an Elliott perspective, does not look conducive to much more upside.
Key technical levels to monitor as support lie at 4.18%. (3/28/24 intra-day lows in Yield.) This cannot be breached without thinking the entire bounce over the last three months could be peaking out and should give way to a plunge down under 4%. Meanwhile any further near-term bounce should find strong upside resistance between 4.45-4.55%.
US10YR
Healthcare’s decline should extend into late April
Today’s breakdown in Healthcare is largely being driven by weakness in HUM 0.36% CVS -1.34% and UNH, not to mention weakness in MOH -0.05% , CNC 1.30% , which are all lower by more than 5% in early trading today. The Healthcare insurers have shown some above-average selling pressure given that payments for private Medicare plans were not boosted as much as had been expected.
Equal-weighted Healthcare (illustrated by Invesco’s Equal-weighted Healthcare ETF (RYH)) has violated the uptrend which had been in place for 2024. Furthermore, as was mentioned last week, Healthcare’s recent breakdown vs. S&P in relative terms warranted my lowering its technical weighting from Overweight to Neutral, anticipating that April/early May might prove negative for this sector.
The next 3-4 weeks should bring about further underperformance in Healthcare, so this is not a sector to overweight and/or look to buy dips in the short run. DeMark exhaustion signals suggest another three weeks of possible underperformance before some downside exhaustion might appear that might mark support.
Short-term technical targets for Biotechnology’s IBB -0.71% ETF lie at $131.28, while the IShares Medical Devices ETF should find support near $56.52. Furthermore, the SPDR Healthcare Services ETF (XHS) is nearing support and might not immediately undercut $90, but looks to be nearing support. Finally, VanEck Pharmaceuticals ETF (PPH -0.80% ) could find temporary support near $88.
Weekly chart of RYH relative to Equal-weighted S&P 500 (RSP 0.44% ) is below. I anticipate a possible retest of former lows from last Fall in relative terms before a bottoming out in Healthcare.
RSPH/RSP
Silver looks to be breaking out to join Gold’s recent strength
Silver has pressed higher to the highest closing level in nearly a year, despite interest rates having pushed higher in recent weeks. Commitment of Traders data from Bloomberg highlighted Tuesday that Silver positioning is now nearing five-year highs and is longer on a percentile basis than any other major bond, equity or commodity future. (This Net long positioning is based on the Speculators position as a percentage of Open interest.)
Technically speaking, it’s likely that consecutive daily closes back above $26 (generic Silver futures contract) should drive prices up to the high $20’s in the short run and should eventually lift Silver back to new all-time highs.
While Gold has trounced the performance of Silver lately and precious metals stocks have not been keeping up with gains in Gold, that looks to be slowly but surely changing.
Tuesday’s close back above $26 represents the highest daily closing price in front month Silver futures prices since Last Spring. Furthermore, this ability to have rallied back quickly over the past month to rechallenge resistance near $26 could be helping the largest consolidation pattern give way to an upside breakout.
As discussed in recent weeks, Silver should be on the verge of making a comeback, and this week’s gains look important and positive in that regard.
In the short run, Silver’s generic Futures chart breakout should allow for price to challenge former peaks from 2021 back near $27.77.
Above that level could be likely into this coming Summer, but this rally could happen quicker if interest rates start to pull back a bit more quickly. (Recently, precious metals have been working in absence of any decline in real rates.)
SILVER
Tesla decline looks to be a short-term negative only
Sharp 5% drop for TSLA 10.19% which managed to confirm the already downbeat expectations as 1Q Sales fell nearly 9% in what was seen as possible slowing demand for Electric Vehicles.
Technically speaking, this is a bearish drop, and makes the bounce from early March appear like a three-wave corrective bounce. Thus, the odds favor a possible test and minor break UNDER March lows.
However, nothing changes the current technical view that TSLA should be in a bottoming process and should be starting to push higher. Given the cycle composite showing March-April bottoming timeframe, along with TSLA’s normal seasonality trends and 4/17 earnings, I view this negativity as something that ultimately should prove buyable.
Support in the short run lies at March lows $160.5 and under this would likely drive a move to $152-$155, which would make TSLA quite attractive from a counter-trend perspective to buy dips.
Overall, there is no change in my technical view between now and end-of-year on TSLA 10.19% , as I expect TSLA to bottom. However, in the short run, today’s 5% drop is a bearish development and it’s incorrect to use today’s weakness as thinking it’s right to add to existing longs for those with a short-term timeframe. Key levels where TSLA should begin to trend higher lie at $183 and it’s a necessity to close above this level. Conversely, $160.5 could have importance, but it’s looking increasingly like $152 might have to come into play first.
TSLA
