The rally which started Monday likely should carry SPX back to 5400. A five-wave advance higher represented the first real positive structural effort off the lows, and both US Dollar and Treasury yields look close to turning back lower. GOOGL, NVDA and MSFT’s gains look impressive technically and can lead this rally despite some strength lacking out of Financials and Industrials this week. Overall, I expect that gains to SPX-5212 are underway, then ultimately 5400.
The gains in GOOGL and MSFT were important in helping both SPX and QQQ lift above this past Wednesday’s peaks during Friday’s trading session. This is a bullish development and should serve as a technical catalyst to keep this rally going up to SPX-5212 and then 5400. Despite some weakness out of Industrials (which has lagged this week given underperformance in CAT -0.40% , TXT and some of the Airlines) SPX and QQQ look to be positioned to rally back to test and exceed the peaks from late March.
At present, there is some slight weakness in Industrials and Financials which will need to be resolved to have some confidence in this rally continuing to 5400. I think that’s likely but for now, it’s largely just a Technology dominated rally which we’ve seen before to kick off bull market runs following minor consolidation.
Breadth finished at better than 2/1 bullish which was encouraging, yet fell short of levels seen this past Monday and Tuesday. Moreover, the rally in the US Dollar hasn’t properly peaked out yet, along with US Treasury yields which remain pointed higher. (Friday’s economic data failed to generate a Treasury selloff (spike in yields) which could mean that this week’s inflation data very well could be baked into the market at this point.)
The daily SPX chart below shows the success in closing back over this past Wednesday’s highs which is a structural positive heading into next week’s FOMC meeting and AAPL and AMZN earnings. SPX managed to log its best weekly gain of the year. Overall, I feel that lows are in on this prior three-week decline, and gains should occur into the early part of May given this week’s recovery.
S&P 500 Index
QQQ headed towards its first important resistance on its rally
QQQ managed to regain more than 4% this past week which helped it recoup much of the prior week’s damage.
Gains are likely up to 435, which will be an important technical step for the Invesco QQQ Trust after its decline from late March.
Its selloff from late March nearly reached the 38.2% Fibonacci retracement zone of the entire rally from October 2023. However, despite the rolling over in momentum on daily and weekly timeframes, it’s monthly momentum and trend from early 2023 lows remains very much intact.
Thus, it’s thought that this pullback is short-term in nature and has not caused any material damage to QQQ, structurally speaking.
Above 435 should result in a rally to challenge and exceed 450 into May.
Invesco QQQ
KWEB breakout meaningful for China’s Equity indices to begin showing better strength
China’s Large cap Ishares ETF (FXI 1.38% ) and the China KraneShares Internet ETF (KWEB 0.60% ) below have both exceeded meaningful one-year downtrends from early 2023, which give optimism that this week’s gains can extend further into the month of May.
Given that the February 2024 bounce led to six straight weeks of sideways consolidation before this past week’s surge, I’m betting that this week’s positive follow-through should lead to further gains, and might lead to a full retest of early 2023 peaks near $36.
Overall, while I’m unwilling to bet on an intermediate-term rally in Chinese Equities just yet, I do feel that the next 4-6 weeks can push higher, and that $36 represents the most likely short-term target for KWEB.
China’s Large cap Ishares ETF
Bitcoin’s Market Dominance chart showing signals that BTC can start to show relative strength again after breakout
(I shared this today (Friday 4/26) with our Digital Assets team, but felt that it was important enough to share here as well. For those who seek daily technical analysis on Cryptocurrencies, I would invite you to read Crypto Comments put out by Sean Farrell and team.)
Bitcoin’s dominance chart (Market capitalization chart vs. other Cryptocurrencies) shows some settling post the halving two weeks ago but remains quite bullish in thinking BTC relative strength can likely continue. The recent breakout in the dominance chart of the lengthy four-month triangle consolidation is considered quite bullish for Bitcoin’s prospects to show further outperformance, and the recent consolidation has not violated any key uptrends which might warn that Bitcoin could be on the verge of turning down, relatively speaking.
Overall, I view this minor pullback in the Dominance chart as setting up an attractive risk/reward opportunity to own BTC for a push back up to new all-time highs in the weeks and months ahead.
Bitcoin’s Dominance Chart (BTC Mkt Cap / Cumulative Mkt Cap of Crypto)
