As I am on break next week, there will be no reports and videos.
The early week stabilization in SPX has been encouraging, but technical structure at present remains a work in progress ahead of next week’s important CPI report. At present, despite this week’s wild cross-asset volatility, it looks correct to favor risk assets for gains into September, despite more progress being needed technically. As discussed in recent days, I feel that lows are likely in place for now after this sharp decline from mid-July. Equal-weighted S&P 500 and Equal-weighted QQQ remain in much better shape, following just a scant 3% decline from all-time highs in recent weeks. US Dollar and US Treasury yields should be ready to turn back lower, SPX should turn up in a more direct fashion after August expiration. Bottom line, the risk/reward favors a return to growth and Technology bounce after the recent pullback to support.
We conclude one of the wilder weeks of the year for cross-asset volatility on a high note which included both the best and worst days of price action of the last couple years for Equities along with above-average swings for “FX” and Treasuries.
As discussed in recent days, the near-term technical pattern for SPX still has some work to do in technical pattern progress along with momentum improvement before being able to call for an immediate push back to new highs. However, as I’ll explain in today’s report, that seems like the most likely outcome between now and September for a variety of reasons.
Let’s start with the reasons for optimism for August, before breaking down the specific near-term technicals of SPX and earmarking a few key reference points for this next week.
These are the 3 Areas which are the most important for SPX chart
As shown below, SPX has now rallied for three of the last four trading days. Prices now lie just below the first key area which also happens to approximate the 50% retracement level of the entire decline from mid-July: 5390.95 (~5391) (Shown as green horizontal line on chart below). This lies right near the 50% retracement of this prior decline but has a lot of importance to the technical structure of this pattern given that it represents the low from 7/25/24 (the first swing low of this decline from July)
Getting above 5391 would satisfy this decline from mid-July as being complete. Furthermore, it would help momentum turn more positive and shift the focus towards the next area of significance, which aligns with the current downtrend for SPX since July. At present, this lies at 5505 (Shown as black diagonal downtrend line on the chart below) but will depend on when SPX is able to challenge this line as to what the exact level will be (Taking another 2 weeks to challenge the line would mean this downtrend intersects at a lower level, etc).
On the downside, 5119, or 8/5/24 lows, (Shown as red horizontal line on the chart below) is paramount to hold on any drawdown which could happen from 8/14 into 8/19. However, the timing is less important than this level holding on any retest. In the bigger scheme of things, my cycle composite turns up sharply after 8/19 into mid-September, which I believe should result in new all-time highs.
(Given that I will be out of the office next week, I’ll present three scenarios which I feel could happen for next week.)
- Prices push up to immediately challenge and break 5391, rising to near 5500 before backing and filling into 8/19. Any pullback, in this case should take SPX to a much higher low than early August. Thereafter, a push up to new highs should unfold.
- Prices churn and do not break out until CPI data next week, but rise up to challenge and break 5500 and go straight back to new highs, above 5669.67 from 7/16/24.
- Price churns until CPI and backs off into next Friday 8/16, and bottoms 8/19 before turning higher. If this happens, I still expect that 5119 holds, but any subsequent challenge and break above 5391 would happen much quicker into September and 5500 might not offer much resistance.
Given that my cycle composite suggests that mid-August can have importance, I can’t rule out backing and filling into next week, nor that prices might remain choppy until 8/19. However, I am quite optimistic that a move higher into September will occur, and the only question for next week is which one of these scenarios the market chooses.
S&P 500 Index
AAPL chart will likely hold the key for S&P 500
Given AAPL’s high weighting within SPX and QQQ, it’s always important to keep charts handy of AAPL to compare and contrast its pattern with that of the major US indices.
As can be seen below, AAPL’s pullback into August failed to break support created by a level of two former peaks in the stock going back since last Fall. That’s important, and represents one reason why the stock market faced strong support on its pullback into early August.
At present, the stock has just closed above $216 for today, Friday, 8/9/24. As can be seen below, this lines up right near its prior lows from late-July along with being slightly under its downtrend extending from the mid-July peak.
To have confidence of a rally back to highs for AAPL, (and by extension, confidence of US Technology possibly rallying back sharply, and AAPL’s strength serving as a notable tailwind for US indices), AAPL requires a move back above $222. Such an achievement would help to break its downtrend, arguing that this correction from July played out as a three-wave decline. Furthermore, this would also suggest a push back to new highs could be quite likely into September.
At present, this hasn’t happened yet, and AAPL remains under resistance. Therefore, next week could hold the key, if/when AAPL starts to make progress sufficient to improve its technical structure. Bottom line, this stock remains key to watch and keep track of, and it’s risen to near important levels based on today’s close.
AAPL Equity
Vistra (VST -1.06% ) still looks attractive here after this minor three-wave decline, but exceeding $82.33 looks important
VST’s three-wave decline looks to have bottomed right near Spring 2024 lows at levels between its 38.2-50% retracement levels.
While some work is necessary before this can begin an uninterrupted rally back to its all-time highs, there are reasons for encouragement based on its recent stabilization.
Technically this appears likely to rise to $82.33, the former low from 6/17/24 which also proved to be an area of resistance during its rise into 7/31/24 (peaked that day at $82.88, marginally above these prior lows).
The ability for VST to surpass $82.88, from last month arguably would help this begin a larger rally back to challenge the highs from early July, and eventually May 2024 peaks just over $107.
At present, this looks technically attractive from a risk/reward basis barring a move back down under $66.50 which would postpone its rally. I will hold on my UPTICKS list and monitor its progress, or lack thereof, over the next month.
VST Equity
FormFactor – Strong downside volume, but this is good to hold at present given its ability to have held its uptrend
This decline in FORM -1.84% proved quite steep over four of its last five weeks. However, this made its lowest weekly close at $40.90 last week, which lined up right near the 50% retracement level of its rally from October 2022.
This appears like a good risk/reward to hold/buy at current levels and I expect a technical bounce up to $50.70-$51.50 initially with additional possible targets found at $53.75.
Failure to reach these aforementioned targets that then give way to weakness in late September could be a concern to investors who might have a lower risk tolerance.
At present, FORM remains on UPTICKS, but will monitor its possible rebound for evidence of strength and volume into the next month before making any decision.
Bottom line, the high-volume decline does look to be a possible issue for FORM in weakening further in October/November ahead of the Election. However, at present, this has held where it needed to technically, so this remains part of the list.
FormFactor Equity
