S&P and QQQ are now back to new all-time highs quickly as US Treasury yields have begun their descent. This won’t prove to be a straight shot for either asset class, in my view, as the broader market has not yet begun to participate, and some signs of negative momentum divergence remain present. However, a stair-stepping rally makes sense for Equities as Treasuries seem to have shown their hand this week, and June seasonality in Election years remains positive. Overall, a bullish stance remains correct, but with close eyes on other sectors starting to kick into gear in the weeks to come. Both AAPL and NVDA are nearing levels that will make an interrupted rally throughout June potentially difficult, but we’ll discuss what needs to happen in today’s note.
Wednesday’s breakdown of May lows by 5, 10, 30-year Treasury yields cemented the intermediate-term trend for the next 6-8 weeks as being down, in my view.
As discussed, we’ve seen a gradual weakening on the fringe in the labor market and some ongoing disinflationary data which the market tends to view favorably. In other words, bad news, in the short run, remains good news for risk assets.
However, there remain some key issues that still need to be discussed which haven’t fallen into place just yet, but I sense should start to happen in the weeks to come. They are as follows:
- AAPL remains over 7% weighting for both SPX and QQQ and is within 1% of very important former peaks which were made twice near these levels since last Summer at approximately $200. In the short run, this area should be important, and very well might limit the ability of SPX to simply follow-through on recent gains. Bottom line, the ability to eclipse $202 will be important.
- NVDA is over 3% in SPX and over 6% weighting in QQQ. This is nearing my targeted resistance area mentioned two weeks ago near $1250 up to $1350 and will begin to show counter-trend exhaustion on both daily and weekly charts potentially within two weeks from very overbought levels.
- QQQ could show its first confluence of TD Sequential weekly “13 Countdown” exhaustion along with a completed TD Sell Setup within 2-4 weeks’ time.
- DJ Transportation Average, Value Line Composite, DJIA, Russell 2000 have all diverged from SPX and QQQ’s push back to new highs. This will eventually be important to see happen to gain confidence that a broad-based move is underway. Merely seeing Cryptocurrencies advance as QQQ hits new highs is insufficient in my view to claim that a broad-based move is underway.
- Financials, and Healthcare have yet to show the kind of strong relative strength that makes these sectors officially having begun to move rapidly back to new high territory. These two sectors represent a combined 25% within SPX. While I expect these to kick into gear, this hasn’t yet happened.
As shown below, QQQ is nearing $466 which I had listed previously as possibly being important for QQQ 0.08% . If QQQ is holding near this level within two weeks, and cannot make meaningful progress in breaking out above, then I’ll address this further. For now, the next few days should allow QQQ to move up to $466 into NVDA’s stock split.
Nasdaq QQQ Invesco
Overall most of my “concern” is regarding counter-trend DeMark-related exhaustion (“Possible Sell signals”) on some Technology names and indices which “could” appear within the next 1-2 weeks, but largely haven’t as of yet. Moreover, the broader market period of “Catch-up” really hasn’t kicked in yet, despite rates having broken down. (Yes, this involves Small and Mid-cap stocks as well.) My cycle composite for AAPL last month showed a potential peak for AAPL near 6/19 which is two weeks away. Finally, the negative weekly momentum divergence is certainly something to keep an eye on. However, this latter point is not really a reason to sell stocks.
On the flip side, trends remain in great shape, seasonality remains bullish for June and July, broader breadth levels remain healthy (Percentage of stocks >200-day moving average), and Interest rates are starting to move lower (which historically has been good over the past year towards leading stocks higher). Finally, sentiment does not look ebullient and speculative, despite some minor Meme-stock volatility having returned. Neither Fear and Greed index, nor AAII shows excessive spreads between Bulls and Bears.
Thus, it’s hard to sell stocks at new all-time highs (meaning in this case, SPX and QQQ). While there are some minor technical factors that have not yet followed suit to the bullish movement in SPX and QQQ, I expect that this should prove short-lived, and will ultimately start to work as indices push higher into August.
If I had to pick a time of concern, in advance, I would think that 6/19 into end of month might show consolidation. However, until/unless there is tangible evidence of this, I don’t usually like to suggest fighting trends.
NVIDIA nearing resistance, but still looks early
NVDA -1.47% breakout yesterday above the prior peaks from late May has helped it begin accelerating higher again following merely a four-day period of consolidation. As Symbolik charts show below, Exhaustion counts remain premature by at least 2-3 weeks on a weekly basis, which means that $1250 should be tested and likely exceeded into its upcoming stock split.
Importantly, for those that monitor DeMark tools, weekly Exhaustion signals are now present (but not confirmed) using TD COMBO indicator (DeMark tool) but yet the Setup count is not yet complete, requiring at least another three weeks higher. Note, this would also allow TD Sequential indicator to possibly also register a “13 Countdown” signal. Furthermore, daily signals (not shown) are also early by at least four more trading days. In plain English, this suggests that the stock likely can continue higher for now, technically speaking, despite having reached stratospheric levels.
I’ll continue to monitor in the days to come, but given that daily and weekly signals remain premature, it’s not unrealistic to expect that NVDA very well might visit the upper end of my resistance target band, which lies near $1350, which might have more importance next week.
Nvidia Corp
Apple stock nearing important prior highs
Many investors might be shocked to see that AAPL is trading within four pennies as of 6/5/24’s close of $195.88, of the weekly high close which was made in late July last year.
Thus, despite a stellar run-up from mid-April, it’s not incorrect to say that AAPL 0.08% still has largely made no progress since last July, despite the volatility.
Technically speaking the peak near $200 from December 2023 as well as July 2023 could have some importance in the weeks to come as a level of technical resistance.
Furthermore, DeMark counts on weekly charts could produce TD Sell Setups within three weeks’ time in AAPL if/when this completes its TD Sell Setup into month’s end (note, this has not happened yet, and will require an additional three more weeks of AAPL’s weekly close finishing above the close from four-weeks prior (at a minimum). Thus, within three weeks’ time, AAPL will need to be trading above $192.38 for a confirmed TD Sell Setup.
Some expect a continued rise and breakout, and this very well could happen. However, I view the resistance zone from $200 into $202 as being important between now and late June.
Furthermore, the cycle composite shown previously in AAPL showed evidence of a possible peak by 6/19 in AAPL stock.
The key takeaway here is that AAPL remains a very important stock for SPX, QQQ and for Technology given its size. It’s now nearing important peaks which I feel are likely to cause at least a minor slowdown and possible trend reversal into July. While AAPL remains intermediate-term bullish, traders with a short-term time horizon might find this important.
Apple Inc
TNX decline has breached important May support
Wednesday gave investors some much needed confirmation on Treasury yields as 5-year, 10-Year, and 30-year yields all violated early May lows.
This is a bearish development for Treasury yields and sets into motion a likely sharp two-month selloff in Treasury yields lower into August.
While some backing and filling very well could happen from 4.23% up to 4.40-4.45%, this should be an area to be long Treasuries for a continued pullback in Yields in the months ahead.
Given the prior correlation between falling yields and rising Equity prices, I feel that a continued pullback in Yields means more for the stock market as a positive, than any minor stalling out in Technology by June expiration (Important point).
Overall, US Equities might start to show the Equal-weighted SPX beginning to play Catchup to SPX, meaning that Technology might lag as Industrials, Healthcare, Financials, Discretionary and others play catchup. At present, this isn’t clear. However, this breakdown in yields is now confirmed for a likely 6-8 week drop and should translate into higher Equity prices, hopefully in a broad-based fashion where Small-caps can play Catch-up.
See the CBOE 10-year Treasury Yield index daily chart below. This breakdown under 4.31% is important and negative for yields structurally between now and August (and on an intermediate-term basis, potentially further into early next year).
US Government Bonds 10 YR Yield
