S&P and QQQ are likely to rally ahead of this week’s CPI and FOMC meeting. However, a weaker than expected CPI report along with discussion of two interest rate cuts for 2024 might help to add conviction to the rally given what’s been priced into the current Dot plot. Overall, more evidence of broad-based participation getting underway would be encouraging for the prospects of uninterrupted Equity gains into the Fall. At this point, while Technology is doing its part to strengthen, more relative strength arguably remains necessary out of both Financials and Healthcare, along with DXY and TNX turning lower. This could take some time, and points to the prospects of a stair-stepping rally for Equities vs. a linear straight shot higher to 5600. Overall, a bullish stance remains correct, but with close eyes on other sectors starting to kick into gear in the weeks to come.
As discussed in Flash Insights Monday morning, US Equity markets remain keenly focused on the FOMC’s Dot plot as 35 bps of cuts are priced into the market right now. This favors a more dovish tilt, as the FOMC won’t wish to shift from three interest rate reductions priced into the market down to one, then be forced to backtrack on any evidence of weaker data this Summer.
Accordingly, my view is that the Economic data along with the Fed messaging should help both US Dollar and US Treasury yields build on the technical breakdown which happened earlier last week. Such a move would be favorable to risk assets as it would provide more clarity to the Fed’s view while helping the market align itself with what the Dot plot suggests.
At present, Technology has certainly taken the lead role in strengthening, as it led all other sectors in trading on Monday, with gains of +1.11%, including strong performance from Solar names along with 3%+ gains out of LRCX, MPWR, and STX.
However, Regional bank woes (specifically out of HBAN) hurt the Financials sector on Monday, and Financials strength is generally thought to be quite important given how big that this sector remains as part of the SPX.
The SPX’s hourly chart below remains bullish from late May and should be positioned for a push up to near 5400 ahead of this week’s economic and Fed guidance. At present, it’s expected that a rally into Wednesday might find resistance given the current five-wave pattern from late May, as part of a larger pattern from mid-April that’s been underway for two months.
I’ll address possible outcomes into these events and what might happen. At present, the path of least resistance remains higher, and I expect gains to follow-through on Technology-led strength into mid-week.
S&P 500
Both GM and Ford show pattern breakouts on strong EV sales for May
Despite the notion of a slowdown Electric Vehicle (EV) demand, both Ford (F) and General Motors (GM) reported strong results in May, led by EV sales.
GM CEO Mary Barra said that May was the best month ever for EV sales, and Ford reported that EV and hybrid vehicles drove gains in May, both jumping roughly 65%.
Increasingly, most charts of EV makers are turning slowly but surely more positive, but both GM and F showed excellent technical breakouts Monday that bode well for additional gains in the weeks ahead.
GM rose 4% on Monday to the highest level in over two years. This gain helped to clear the consolidation base from early 2024 and cleared the 50% retracement level of its prior 2021-2023 decline.
Additional gains look likely for GM up to $62 which represents the first meaningful area of Fibonacci-based technical resistance on the immediate horizon. Ford, to its credit, also achieved a breakout which argues for a move back to challenge early year peaks just below $14 (Not shown)
GM, at present, remains more technically attractive than F given its push back to multi-year highs on strong volume Monday.
General Motors
Tesla remains range-bound, yet in better shape than April; Shareholder meeting might help to jumpstart rally
Tesla (TSLA), meanwhile, remains far more range-bound than either F, or GM in the short run, but this very well might change after its Shareholder meeting this week on 6/13/24.
The stock has generally improved, technically speaking, over the last couple months, but remains mired in range-bound consolidation following the initial spike back in April.
Interestingly enough, the stock has had a history of reversing its choppy downward sloping patterns with sharp gains, (see the 2022-2023 decline compared to 2023 into 2024) and the gradual technical improvement in the stock in recent months suggests this very well could follow the recent breakouts of F, and GM later this week.
I discussed that its April rise happened after TSLA broke out above the downtrend from late 2023. Volume expanded sharply before it went through some consolidation to alleviate the short-term overbought conditions.
While its near-term technicals have improved a bit, TSLA still has strong overhead resistance near $235 that will eventually be a stronger “line in the sand” for intermediate-term gains.
In the short run, any daily close back above $183 would be sufficient to jumpstart the rally back to $235. Given that the stock has had a history of strong upward trending months of June in 2021, 2022, and 2023, we’ll see if 2024 can follow suit in the weeks to come.
Overall, I still favor TSLA technically speaking, but believe that it’s important that it begin trending up sometime in the next few weeks to have more confidence of gains into August. If this were to not materialize, then a rally after the November election into next Spring would be thought to be highly likely based on cyclical projections of TSLA along with the US stock market.
Tesla
Global X Autonomous Vehicle & Electric Vehicles ETF looks primed for an upcoming breakout
Despite the recent technical strength in stocks like F and GM on better EV sales, the ETF for Autonomous Vehicles and EV (DRIV) has not yet begun to strengthen all that meaningfully.
Technically speaking, DRIV has been consolidating in choppy range-bound consolidation in recent years and generally has been trending down since late 2021.
However, the daily chart shows DRIV nearing the apex of its two-year triangle which normally signifies that a large move could be approaching. (Breakouts of Triangles can often happen as price reaches the Apex of the pattern.)
Given the technical breakouts for GM and F recently, I feel that positioning in DRIV at current levels makes sense and consider this an attractive risk/reward. (Interestingly enough, DRIV’s top holding as of 5/29/24 was NVDA at 5.82%. Automakers like Toyota Motor and Tesla had weights of 3.04% and 2.36% as of this date. However, at least half of the top 10 holdings were popular Technology names, not Automakers.)
Technically, resistance lies at $25.50, then $27.80 while support is found at $22.24. Any move over $25.50 should result in a strengthening of price which should rally to challenge 2023 peaks.
Global X Autonomous & Electric Vehicles
