Short-term trends turned back to bullish following Wednesday’s close above 5525, and Technology has snapped back with a vengeance following its recent two-month pullback to support, and we’ve seen some definite evidence of QQQ starting to outperform SPY as Growth makes a comeback. Triangle pattern resistance for both SPX and QQQ should be tested into next week ahead of our long-awaited FOMC meeting, and any break above this resistance could allow for even further acceleration into October before any drawdown. However, given the back month negative seasonality trends, initially it’s expected that the area near 5650 should prove to be strong resistance for SPX, and will be a Line in the sand for Bulls.
The triangle patterns for both SPX and QQQ look important to concentrate on into next week’s FOMC meeting, as this week’s Tech snapback has helped SPX to yet again push up to within 1.5% of all-time highs from July.
Thursday’s PPI and CPI data came in strong enough to potentially cement 25 basis points as the level the market expects into next week, and odds of a 50-basis point cut have been declining for roughly two weeks as economic data has steadied.
Small-caps have managed to reverse course back higher following their own recent pullback to support; Meanwhile, US Dollar and US Treasury yields have shown mild evidence of stabilization lately. However, a final push back to new lows into next week could mark an important short-term turning point based on both TNX and DXY nearing short-term support.
Overall, the near-term bias is for a continued rally into next week ahead of a potential slowdown into FOMC. It’s important to monitor sentiment, breadth, and specifically, the strength of the Technology rally before weighing in as to whether gains could face more serious resistance for any kind of consolidation.
While I recognize that Equities remain in a volatile, seasonally bearish time, I continue to be impressed by the technical structure of Equal-weighted S&P 500 given last month’s success in five sectors having pushed back to new highs on an Equal-weighted basis.
Now some of this broad-based strength has given way to Technology starting to outperform again, and at 30% of SPX, watching charts like AAPL, NVDA, MSFT and GOOGL along with the other Magnificent 7 names and Semiconductor stocks will have importance ahead of next week’s Fed meeting.
The SPX chart showing its ongoing triangle pattern is shown below. It’s thought that 5625-5650 is the next area of resistance. Meanwhile, until/unless 5400 is breached, any backing and filling arguably won’t be too problematic.
S&P 500 Index
Gold stocks look likely to push higher into October as Miners play catchup
This move in Gold back to new all-time highs has not yet been followed by a similar move in Gold mining issues. However, this could be forthcoming.
GDX 0.80% , the VanEck Gold Miners ETF, looks to have successfully broken out of the mild consolidation pattern since mid-2020.
At a Thursday close of $39.21, this lies just 13 cents away from hitting the highest levels since April 2022 with one day remaining in the week.
This recent uptick in acceleration is impressive lately, and I expect that Gold miners look appealing to play catchup following the recent push in Gold back to new all-time highs.
Stocks like Newmont Mining (NEM 0.56% ) were higher by over +4.2% within the SPX on Thursday, one of the best-performing issues.
Overall, I favor strength in Gold miners and I’ll discuss some of my favorites within the mining space into next week in reports and on Flash Insights. GDX looks like the preferred vehicle for those seeking a non-levered ETF diversified play on Gold mining stocks.
VanEck Gold Miners ETF
EEM looks to be pushing back to new lows again vs. SPY
Given some of the inability of China to turn sharply higher during the last few months of decline in the US Dollar, (China is quite important to the Emerging markets ETF EEM 3.64% given its 32.4% weighting) EEM has struggled a bit during its recovery in recent months.
At a current price of $42.63, EEM trades near the same levels it reached back in late April 2024, five months ago.
Following its all-time highs above $58 from early 2021, it’s worth mentioning that EEM currently remains down more than 25% off its all-time highs.
Yet the last few months have been largely neutral based on relative charts of EEM 3.64% to SPY 0.41% until the last few weeks.
This ratio has just plunged back to all-time lows, relatively speaking this past week. Exhaustion counts based on DeMark indicators remain at least one month premature, which doesn’t bode well for EEM’s relative strength, particularly if DXY begins to stabilize and bounce in the next month.
Overall, EEM looks like an Underweight vs. SPY technically, and I expect underperformance which might last until the US Election. Thereafter, if DXY starts to turn down in a larger fashion, it’s worth keeping a close eye on EEM to see whether this can finally begin to show some evidence of relative strength.
At present, my work suggests that those who are seeking for areas of strength in Emerging markets should continue to favor India, which looks to be “head and shoulders” above most other areas within Emerging markets. (Even Mexico has lost some appeal lately given the damaging pullback in EWW 1.11% in recent weeks. However, EWW remains a clear favorite over Brazil’s EWZ 0.75% .)
NYSEMKT:EEM/NYSEML:SPY
Japan seems to be readying for another pushback to All-time high territory
Japan looks attractive for strength back to new 2024 highs following the success in stabilizing over the last week.
Thursday’s close at multi-day highs for the TOPIX index looks to have broken the minor downtrend which resulted in a pullback to retrace the rally from early August.
Prices managed to stabilize right near the 38.2% Fibonacci area of support and now could be beginning a more powerful rally back to test and exceed 2740.
Given that I believe USD/JPY has largely begun to stabilize also and should not drop beneath 140 right away, it’s likely that Japanese Equities might rally as the Yen starts to weaken again this Fall.
Additionally, Elliott-wave studies seem to confirm that the drastic period of weakness into early August was likely a three-wave decline. Thereafter, the rally off the early August lows appeared as a five-wave advance. If this is correct, then a bounce to challenge 2740 should be forthcoming and might be starting this week.
Over 2740 should allow for a move back to challenge and exceed 2946, which looks attainable as TOPIX pushes back to new 2024 highs.
Overall, I expect that post US Election, there could be some additional US Dollar weakness and might involve another move lower in USDJPY. If this were to happen and break 140, some of my thinking of a further rally for Japanese Equities would have to be tempered.
At present, the NIKKEI and TOPIX look quite appealing technically after weakness from July and I expect a strong rally back to 2024 highs.
TOPIX Index
