S&P is growing closer to its Short-term upside technical target of 5521, while QQQ also is nearing resistance a bit higher than 483-5 mentioned last week. Overall, there remains no evidence of weakness in SPX, nor QQQ, and until price violates the rising 5-day moving average and confirms daily exhaustion signals, trends remain bullish, and it’s wise to stick with this trend. Cycles show Late June as marking a possible short-term peak for QQQ, but proof in the form of a break of the current uptrend will be key for confirmation.
Thursday brought about some minor rotation out of Technology, and given the recent run-up in QQQ relative to SPX, and strong outperformance by Technology in the last month, it looks likely that some backing and filling might be possible.
Both NVDA and AAPL now show daily counter-trend exhaustion per DeMark’s TD Sequential indicators; However, weekly exhaustion won’t be possible in either to confirm until next week.
As discussed in recent days, the degree to which Technology has begun to outperform all parts of the US Stock market has grown more pronounced. Yet, this doesn’t translate into an imminent need for a big selloff for the broader market.
In recent days, US Equities have shown some improvement in Financials, Healthcare, Industrials and Energy which could lead to a short-term bounce in the Equal-weighted S&P following some severe underperformance since March compared to the SPX.
As shown below, the Equal-weighted S&P 500 has formed a Triangle formation which I believe ultimately should lead to a breakout of March highs as other sectors besides Technology start to play Catch-up. SPX itself lies just below an important overhead target which seems to intersect near 5521 and stretches up to 5534.
S&P 500 Equal Weight ETF
As discussed, I find it difficult to imagine anything more than just a minor 2-3% pullback into July. Additionally, the technical thesis of a weakening US Dollar and Treasury yields looks to be materializing, and this should be supportive of risk assets into the early Fall. Thus, it’s expected that weakness in the back half of June should prove short-lived and make SPX attractive for further gains into August.
Equal-weighted S&P 500 should bounce near-term vs. SPY
The chart below shows a very severe downtrend from April 2024 into June of Equal-weighted S&P 500 (RSP -0.23% ) vs. SPY -0.14% , which largely just shows a reciprocal of what Technology has done since that time.
(Thus, the tech-heavy SPX has outperformed the broader market, which makes RSP weaken relative to SPY.)
At present, this looks ripe to reverse, and I suspect a short-term bounce in RSP vs SPY is imminent and should happen between now and End of quarter into July.
Charts of DIA vs. QQQ look similar to the one below (not shown) and make a strong case for some temporary mean reversion out of Tech as the broader market does relatively better.
However, it’s important to relay that neither weekly nor monthly charts seem to indicate that a bounce in RSP should prove long-lasting vs. SPY. Thus, while it’s certainly possible that a more broad-based move out of various Non-Technology based sectors should happen relative to SPY on a 1-3 week basis, it’s still premature to call for any sort of longer duration broad-based expansion of the US stock market vs. Technology.
S&P 500 Equal Weight ETF / S&P 500 (Cap Weight) ETF
NVIDIA is getting closer towards suggesting some confluence in daily and weekly exhaustion
Thursday’s reversal from just above $140 looked important given NVDA -1.48% getting up to the high point of the $135-$140 resistance range and then reversing course, and the stock finished near the lows of the day at $130.86 (Intra-day highs of Thursday’s session were technically $140.76).
Does this mean the top is in? A one-day reversal to create a bearish engulfing pattern is typically important for the near-term to suggest that a turning point might be near. However, there still wasn’t a meaningful move to three-day lows, nor a break of its 5-day moving average.
Moreover, DeMark related exhaustion remains incomplete with regards to the TD Sequential daily “13 Countdown” signal along with the weekly signal being complete (which could happen next week).
Furthermore, a plethora of investors, (including some well-known Financial-media personalities) have weighed in lately as to whether NVDA was “overbought” and potentially vulnerable to a pullback. (This kind of public discussion of a top by those not well-versed in Technical analysis is interesting, and rarely effective in picking inflection points in stocks normally.)
Overall, $135-$140 was a range for my own resistance targets on NVDA based on two separate projections of former price swings extrapolated to try to ascertain a technical target.
However, barring a close under the 5-day moving average, in absence of any confirmed counter-trend signals and/or evidence of a close at three-day lows (which is thought to be a minimum consideration as to whether short-term consolidation might be in store), it’s still very difficult to attempt to pick a top in a stock like NVDA.
I suspect that the combination of daily and weekly exhaustion, coupled with cycle composites turning lower, and actual evidence of technical weakness (undercutting 5-day moving average and hitting new 3-day lows) would likely result in short-term consolidation for NVDA into July.
However, I am not at all convinced that this would prove long-lasting, and should provide excellent opportunities for those looking to buy dips. Two key areas stand out as possible areas of support on retracements in the weeks ahead: $116 and $108, which would signify a 38.2% Fibonacci retracement and a 50% retracement of the rally since mid-April into the intra-day high from 6/20/24.
As shown below, trendline support based on a simple arithmetic chart lies near $110, which certainly can’t be ruled out in the months ahead given that NVDA’s monthly RSI is approaching 90, and the stock traded at 100% above its 200-day moving average which lies just above $69.
NVDA Equity(Daily)
NVDA’s long-term area of support is shown below; This would certainly be attractive technically on any weakness into late September/October
When taking a longer-term perspective, and looking at logarithmic charts for NVDA (which is proper given the degree of acceleration in the shares in recent months), we see that the trendline connecting last October’s lows pointed higher seems to intersect between $90-$100. (Much depends on how long this takes to challenge this area when trying to ascertain a more exact area of support based on trendline analysis alone.)
This area certainly is not indicative of a mandatory retest in the months to come. However, on any selloff during the Fall months, this area would certainly take on appeal as an area of longer-term trendline support to monitor if/when the stock does approach this area.
I expect that the next month could prove a lot choppier than what’s happened since mid-April. Furthermore, if there is a minor rotation out of Technology, then NVDA along with AAPL very well might show some minor backing and filling.
However, given the lack of trend damage thus far for US indices along with the fact that sectors like Financials, Industrials and Healthcare seem to be starting to show some relative strength this week, it stands to reason that these sectors might provide some stability on any underperformance in Technology in the weeks to come.
Bottom line, there is no technical proof at this time that NVDA is peaking out based on technical analysis. Thursday showed a minor reversal signal, and other methods seem to suggest that a pullback in NVDA could be close and might materialize in the next couple weeks. However, I am of the opinion that pullbacks into July likely represent appealing technical risk/reward opportunities. Barring meaningful weakness, it’s just difficult to weigh in too strongly on NVDA making any kind of top, and it continues to be attractive on an intermediate-term basis.
NVDA Equity (Weekly)
