S&P and QQQ have now rallied into and through the CPI print and FOMC meeting with little to no evidence of any trend reversal. Treasuries did pull back from early day gains, but trends in Yields remain pointed lower along with the DXY and should aid the rally in risk assets into next week. Sectors like Consumer Discretionary and Industrials have been strengthening, but it remains Technology that continues to show true dominance in outperforming all other sectors over the past few weeks following the recent AAPL and NVDA breakouts. No evidence of any counter-trend exhaustion is present at this time, and barring any weakness in the indices themselves, it’s hard to find much of a technical reason to suggest selling simply based on the recent rally having gotten extended.
It’s not wrong to say that Technology has come back with such a vengeance since mid-April that many investors and Portfolio managers feel awkward about chasing the movement in some of the Tech hi-flyers. Stocks like AAPL -3.20% , after all, are higher by 10% in just two days’ time while NVDA has pressed higher to the tune of +65% in less than two months.
Overall, the key to whether it’s right to chase a market like this has everything to do with one’s own risk tolerance and timeframe for investment. As discussed over the past week, sentiment had become understandably subdued given the lack of clarity from FOMC guidance (lining up with what the market had priced in), and many Tech stocks have surged higher in a very short period of time. However, the latter is rarely a reason to avoid investing, (for those with long-term timeframes) and no evidence of momentum and/or price deterioration is still visible to give investors much of a warning.
Rather, Technology has skyrocketed back to new all-time highs relative to the broader market, and other sectors like Consumer Discretionary and Healthcare have shown gains over the last couple weeks, with Industrials having achieved its own minor breakout during Tuesday’s session.
While the Small and mid-cap areas of the market showed above-average strength following Wednesday’s CPI report, more is needed to have faith that both Small and Mid-caps can begin outperforming, despite their short-term charts suggesting additional upside.
For those that utilize counter-trend exhaustion tools towards attempting to find peaks and troughs in US Equity markets, it should be noted that QQQ 1.01% could very well line up with both daily and weekly signs of upside exhaustion (In the form of a TD Sequential and TD Combo 13 Countdown signal) as early as next week. (Ideally, weekly charts would show a stronger signal on the presence of TD Sell Setups along with a TD Sequential 13 Countdown signal for QQQ, and this would require another 2-3 weeks possibly.)
Nasdaq QQQ Invesco
In plain English, it looks early this week to expect much of a reversal, and price action has proven resilient and upward sloping, with no evidence of any trend damage. If anything, the opposite is true, as prices have spiked higher to overbought levels, which makes some investors nervous. Many might recall the AAPL cycle composite chart which had suggested a rally up into 6/19/24, and I suspect that this might prove to be an important time for Equity indices late next week.
Overall, with lack of any meaningful reversal signals and/or exhaustion signals being confirmed, trends remain bullish and QQQ’s movement above $466 could now likely lead this up to $480. SPX targets by the end of June likely could hit 5439 at a minimum but have the potential (on further evidence of Treasury yields turning back down sharply) of rallying to (what I believe to be a maximum) near 5539 before stalling out.
I don’t suspect that late June into mid-July will prove to be a linear upside progression, but barring any evidence of trends giving way, it remains right to still be positioned for higher prices in Technology and for the broader market.
Two-year Yield backtracks following Powell’s comments, but trends remain lower and Two-year is likely headed to 4.20
Following the June FOMC meeting, Chair Powell’s comments might have seemed more hawkish to some given this morning’s weak CPI having “teed things up” for a more dovish tone. Yet their key message seemed to be simply that “Disinflationary trend seems to be happening more slowly, and they have the same trajectory for cutting rates, but just on a delayed timeline”.
The current Dot plot seems to be suggesting that the FOMC’s message is simply ambiguous, and a bifurcated message seems to have shaken the early Wednesday rally in both Treasuries and Equities.
Overall, yields are now back above earlier areas of support that had been violated, but given that the Fed has ample room now to tweak and rates will be headed lower, not higher, Treasuries are likely quite attractive to buy on this afternoon’s dip along with Equities, which show no daily Evidence of exhaustion.
Bottom line, I don’t view this minor intra-day reversal as all that serious for Treasury yields across the curve (Though finishing below May lows at the lows of the day would have been far more convincing for imminent follow-through possibilities).
I expect that Wednesday’s earlier breakdown in yields will ultimately come to fruition and 2-Year yields should break support and trend down to near 4.20%.
US Government Bonds 2 YR Yield
Small-caps got some much needed boost during Wednesday’s session
IWM finished Wednesday’s session up +1.54%, which broadly outperformed SPX, & QQQ, along with DJIA (which finished fractionally lower on the day).
This rally fell from the intra-day peaks near +3.5+%. However, by end of day, finishing at multi-day highs on a closing basis still proved to be far more positive than negative, and should serve as a catalyst to help jump-start the movement higher in Small-caps given the ongoing Treasury rally.
Overall, a move back over $210 in IWM is thought to be imperative towards allowing for the Russell 2000 ETF to begin a more material uninterrupted advance, and this also likely helps the relative picture vs. the SPX.
Near-term, this pattern below depicts a similar triangle pattern as shown in yesterday’s report when I highlighted the Equal-weighted S&P 500.
Thus, while the SPX and QQQ have risen for six out of the last seven trading sessions, making the market seem like a “runaway train”, the broader market is just slowly beginning to participate.
I sense that there should be a breakout in IWM along with RSP as Treasury yields start to turn down more forcefully in the weeks to come.
In the short run, given the burst in momentum in recent days, any minor pullback for IWM likely will find strong support near $202. Meanwhile, movement back above $207 should face little resistance until $210.
iShares Russell 2000
Oracle breakout paves the way for a likely rally up to $160
AI-fueled Cloud growth and FY 2026 Revenue expectations helped ORCL -1.91% (part of the UPTICKS list) break out of its year-long base that was initiated near this same time in June.
(For new subscribers and clients, UPTICKS is a technical long list which I created back in 2022, a play on the name of the publication by mathematician, physicist, astronomer, theologian Isaac Newton entitled OPTICKS back in 1704)
ORCL -1.91% staged a massive breakout of this year-long reverse Head and Shoulders pattern at today’s open following today’s bullish earnings report. Its close above $132 successfully exceeded peaks which had held a few different times since last June.
Volume spiked to over 40 million shares on Wednesday, which proved to be the highest volume since mid-March. Overall, I anticipate a move up to $160, given ORCL’s conclusive pattern breakout, right near the 1-year anniversary peak.
This has improved technically & any minor pullbacks should prove short-lived and would make this more attractive, with strong support now near the pivot area of today’s breakout near $132.
Overall, while Software as a sub-sector has proved volatile in recent weeks, ORCL stands out as one of the technical leaders, and today’s breakout should lead this higher into August, with any dips proving minor, and short-lived.
Oracle
