US Equity trends remain bullish and mildly overbought after this recent early July run-up, and it remains difficult to fade SPX or QQQ ahead of this week’s all-important CPI report. Minor evidence of strength is apparent from Consumer Discretionary, Financials, Industrials and Materials, but still largely hasn’t proven broad-based enough to suggest a bigger period of outperformance from these groups has gotten underway. Overall, cycles, seasonality, and ongoing strength in Technology argues for a bullish stance in US Equities into at least mid-July before some backing and filling. SPX has now entered my target range, but yet still is wrong to suggest profit taking with zero evidence of any trend failure. I suspect that a possible stalling out could happen into next week between this SPX 5650-5700 area, but that only 2-3% pullback might happen ahead of even further strength.
Most of the market commentary on both TV along with the social media platform X “Fin-Twit” (Financial Twitter) revolves around the commonly known fact that markets remain dominated by a few select stocks which have represented most of this year’s S&P 500 returns. In fact, in my latest monthly report I showed that the top 20 largest SPX companies have represented 82% of this year’s gains.
However, facts like that shouldn’t be interpreted as being bearish, nor being used as a catalyst for why any sort of stock market correction should get underway. As I’ve discussed in these reports quite frequently in recent weeks, the lack of meaningful relative strength in sectors outside of Technology is only useful to mention if Technology has begun to wane and turn lower.
This year, as most investors are aware, Semiconductors (as a Level 2 GICS Sector) have returned 80%+ and are outperforming all other groups meaningfully as NVDA, MU, AVGO, and TSM, are all up more than 90% in the rolling 12 months. (NVDA of course is up 219% since 7/10/23, one year ago.) Meanwhile, sectors like Industrials and Financials continue to look appealing to push higher given recent attempts at bottoming after the recent consolidation.
It seems like investors are grabbing at any piece of information which might suggest that a stock market pullback might be approaching (so as to buy into it on weakness).
One such example concerns the popular DeMark indicators, a counter-trend methodology which many have pointed out are now suggesting that a possible top is near.
However, a few reasons suggest that these aren’t yet in alignment (based on my own personal methodology of utilizing these on multiple timeframes and awaiting confirmation), and until that occurs, trying to “front-run” any potential signal ahead of confirmation is typically unwise.
As shown below, the weekly QQQ chart did recently line up with TD Sequential 13 Countdown signals and a TD Sell Setup (which many investors would call “a Sell”. However, to properly be interpreted as having any relevance, this indicator must first be confirmed (by means of a weekly close under the close from four weeks prior).
This has not yet happened, and now prices are pushing back higher, and have disqualified both the TD Propulsion target and the TD Sell Setup risk levels of its recent weekly 9 count. In plain English, until/unless QQQ were to close down under 480.10 by next Friday 7/19, or close down under 479.20 by 7/26, this signal doesn’t warrant paying much attention to. While there were both daily and weekly signals present over the last week, there hasn’t been any confirmation, and prices are continuing to push higher.
I suspect that QQQ-505 to 510 very well could be possible ahead of some minor backing and filling, but this remains a very strong rally, and until evidence of technical deterioration arises, it’s proper to stick with this current trend.
Nasdaq QQQ Invesco ETF
Bitcoin doesn’t yet signal a low is at hand, and trends remain quite negative
(I wrote the comments below for Wednesdays’ Digital Asset team’s Daily report, and would encourage anyone who wants daily Crypto analysis to visit Sean Farrell’s team’s work, as I contribute to the team’s reports every weekday.)
Following three straight days of gains, many are wondering if Bitcoin might have bottomed out and has begun a new technical uptrend. Unfortunately, while a short-term low does appear close, technically speaking, a bottoming out likely requires a final pullback into next week before any kind of low is in place.
Daily charts show the ongoing downtrend from early June which has resulted in BTC 0.03% losing more than 20% over the past month. However, until $60k can be exceeded on this bounce, its sharp downtrend remains in place. Second, counter-trend DeMark signals of downside exhaustion remain premature, requiring a move back to new monthly lows before being officially complete.
Finally, BTC’s daily cycle composite seems to show a cyclical low materializing around 7/15-16th which could translate into a tradable low happening next week. Downside targets look to intersect near $51.5k, which likely could allow for stabilization and a bounce attempt into early August. However, we’ll need to see meaningful strength to argue that this selloff has run its course.
Bitcoin
DECK is being removed from UPTICKS on this week’s weakening trend
Weakness in DECK today violated the most recent six-day consolidation along with severing a lengthy uptrend from last Fall’s lows.
This is a bearish development, and volume surged to the highest levels since late May. Unfortunately, this has not worked out as planned and it’s right to remove this name from UPTICKS and revisit this at a later time.
While DECK did attempt an intra-day bounce in Wednesday’s session, it remains well off Wednesday’s opening print and would need to regain $960 to restore confidence. At present, a decline down to test April’s lows cannot be ruled out in the short-term.
Deckers Outdoor
MSTR also is being removed given its volatility and lack of evidence of any trend improvement
Other UPTICKS holding is being removed based on its recent trend deterioration, and in this case, MSTR’s pattern is quite correlated to the price of Bitcoin.
As this daily chart shows below, MSTR has bounced for the last few days, but its strength has proven insufficient to improve this ongoing downtrend.
Until/unless MSTR can achieve a weekly close back above $1400, it’s thought to be susceptible to additional weakness, and its high-volume selloff lately is not encouraging.
Technically speaking, I had assumed this might form a triangle pattern before heading higher. However, any break of $1202 would result in MSTR likely pulling back to test May lows near $1010. The extent of this possible volatility and risk makes it unattractive for the UPTICKS portfolio, and I’m willing to remove this and find a substitute in the weeks ahead.
The fact that this tends to track the price action of Bitcoin, which has begun a steep correction that doesn’t seem complete, is reason for technical concern on keeping this as a core holding. I’ll revisit this name once Bitcoin has begun to stabilize.
MicroStrategy Inc.
