Equity trend bullish but I suspect that until both DXY and TNX break trendline support the rally might prove a bit choppier into the end of May before a stronger push higher. A broad-based move seems to be approaching, but hasn’t yet been confirmed by a breakout in Equal-weighted S&P 500 nor Russell 2000 index. Overall, while short-term trends have been bullish in SPX and QQQ, the last few days have been lower in Equal-weighted SPX, showing consolidation, despite recent strength in Technology. I suspect this weakness proves short-lived given Tech strength and other sectors should be able to come to the rescue. A broad-based rally should begin by end of month, and momentum and breadth are supportive of further gains into mid-to-late June.
S&P trend should push up to 5350-5400 into mid-June before some minor consolidation
This picture helps to explain the recent price action and wave structure in SPX, and despite some minor stalling out in the Equal-weighted SPX, it’s still likely that SPX can push higher to at least 5350.
The wave structure over the last week makes a compelling case that SPX might be in its fourth wave higher from mid-April.
If this is true and upside targets are near 5400 before consolidation, then the Fibonacci range on this recent SPX price action is shown below.
As can be seen, following a sharp rise into mid-June, a drawdown might get underway if/when we see SOX and AAPL hit upside targets and begin to consolidate.
This might allow for a pullback down to 5200 or even a bit lower ahead of yet another rally into August.
The immediate takeaway is that last week’s 5341.88 intra-day peak should be challenged and exceeded over the next couple weeks.
Once prices reach a possible peak sometime in June, I do anticipate some backing and filling into July. For now, this trend remains bullish and should lead higher in the weeks ahead.
NVIDIA looks to be nearing targets much sooner than expected
Interestingly enough, NVDA -1.42% has pushed up sharply ahead of next month’s stock split and has not yet shown even minor evidence of trying to peak out technically.
My former 1250-1350 targeted resistance was based on Fibonacci extensions of two prior uptrends for NVDA, projected from the mid-April 2024 lows.
The two open gaps in its recent trading from 5/23 along with today’s trading (5/28) signal a very strong rally underway, and NVDA thus far has managed to push higher regardless of the presence of a daily TD Sell Setup pattern on its daily chart.
Given the confluence of the daily and weekly Symbolik DeMark indicators, I expect that NVDA might rally further into its stock split before showing consolidation.
The key takeaway is that lack of counter-trend exhaustion based on DeMark indicators on either weekly or monthly charts necessitates a bullish stance, regardless of how “overbought” the stock might seem based on traditional momentum indicators.
The success of NVDA closing near the highs of its daily session (vs. reversing to close the day at a loss after early upside progress) is thought to be a bullish technical factor that can allow this rally to continue a bit further into June.
Furthermore, the lack of confluence in SOX counter-trend signals also warrants sticking with a bullish position at present. Until/unless some evidence of NVDA tiring develops, it could be possible that this might reach 1250 ahead of a possible split.
I’ll watch carefully for evidence of weekly and/or monthly exhaustion, which at present remain quite premature.
Vaneck Semiconductor ETF (SMH) might hit 260 before stalling out
The weekly chart of SMH complements the NVDA chart, as both suggest it should be still early to consider a peaking out in Semiconductor stocks, despite this rally having reached overbought levels.
I’m watching the weekly DeMark indictors on this rally and until there is confluence on weekly charts (and QQQ also remains early in this regard which could be important for Technology) then I’m willing to give this rally the benefit of the doubt to continue into mid-June without much worry.
The weekly charts currently show a TD Combo count on a 9 (out of possible 13) while the TD Sequential count shows an 8 count (out of possible 13). Furthermore, the TD Sell setup count shows a 6 count (out of possible 9 count).
In plain English, these indicators arguably will necessitate at least another three weeks at a minimum before any evidence of minor stalling out might occur (which marked a temporary peak in March 2024).
Barring any evidence of a sharp reversal (which in absence of a counter-trend reversal signal, would constitute an attractive risk/reward opportunity), I’m inclined to think Semiconductor stocks as a group can still continue higher into mid-June.
Healthcare requires some immediate stabilization
The recent Technology rally has disguised some of the underperformance in important sectors like Healthcare (important given that this is the 2nd largest SPX sector behind Technology at 12.5%).
Thus, after a minor bounce in early May, Healthcare has turned back down sharply in the last couple weeks. The rolling 1-month performance for Equal-weighted Healthcare (RYH) was just 1.1% through 5/28/24, underperforming SPX and also Equal-weighted SPX (RSP -0.18% ).
Near-term, the relative chart of Invesco’s Equal-weighted Healthcare ETF (RYH) has pulled back to retest former lows.
Given the strong bullish seasonality trends for Healthcare in the next couple months, I’m inclined to think this could be an interesting spot for the sector to attempt to bottom out again after its initial failed attempt.
However, the lack of any stabilization in Healthcare into June could be an eventual concern for the idea of broad-based participation for the SPX. Given its size, it’s important that Healthcare start to act a bit better technically, sooner than later. I remain Overweight Healthcare technically speaking, but feel that lack of a rally into mid-June/July followed by continued deterioration could be a technical problem for the Fall for this sector.
Stocks like LLY 0.30% , VRTX -0.06% , ISRG 0.15% , BSX -0.30% , A -1.61% , MRK -2.46% , NVO 0.31% , REGN -1.76% remain technical favorites within Healthcare.
