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.
Momentum and breadth are getting increasingly better as both SPX and QQQ push up to test triangle resistance into next week’s FOMC meeting.
All 11 major sectors within S&P 500 finished higher on the day, with Materials, Discretionary, Comm. Svcs. and Utilities finishing up over 1%. Market breadth proved to be very good and NYSE Advancing issues reached the highest levels since mid-August.
Overall, the near-term bias is for a continued rally into next week ahead of a potential slowdown into FOMC. However, given the rapid snapback in Technology and improvement in momentum, I’m growing less bearish on prospects of a large selloff happening just yet in the back half of September. Increasingly there might just be a stalling out and minor consolidation ahead of continued strength into mid-October.
Such a move would clearly defy many investors’ thoughts who have had it “hammered home” by the media that September is a bearish month for stocks. However, as I’ve discussed in recent weeks, the act of five sectors having pushed back to new all-time highs into late August means that in my view the market is honestly in much better shape than many give it credit for (particularly given the extent of the Technology rebound ). Additionally, during Election years going back since 1950, September has proven to be a better month for SPX than October in median returns.
Overall, it will be 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.
The SPY chart showing its bullish advancing Triangle pattern is shown below. The area near 565 certainly looks like an important area for S&P and should provide strong resistance ahead of some minor consolidation. However, pullbacks post-FOMC might take the shape of a 38-50% retracement of the rally up from early September before breaking back out to new highs.
Such a move would line up with cyclical projections shown recently for a possible rally into mid-October. (I’ll discuss this in more detail early next week).
S&P 500
Silver now looks to be playing catchup to Gold on this week’s strong rally
The breakout back to new highs for Gold has just resulted in Silver beginning its own ramp back to new 2024 highs.
Friday’s rally extended a two-day period of gains that produced a breakout to the four-month consolidation pattern that started back in May.
The act of having exceeded late August peaks at $30.22 in front-month Silver Futures was a welcome development that makes the technical picture much more bullish.
Given that the May-August decline proved to be three waves lower, Silver should push back to new highs into this Fall.
Resistance levels should come about near $32 initially than $32.75, but into October, might stretch up to $34-$35.
Silver had lagged the move in Gold due to China’s feeble recovery, but this week’s rally makes this a lot more actionable. While Gold still is preferred over Silver, this week’s move should help to jumpstart the move back to new highs.
VanEck Gold Miners ETF
Grains look to be making a bottom; But how long can the rally last?
Grains have shown impressive movement off the lows in the last couple of weeks, with Corn, Soybeans and Wheat all rising to monthly highs and multi-week high closes this past week.
This is interesting as USDA has hiked their projections for Corn for 2024 to 15.19b bushels for US production, the second highest on record. However, EU Corn production will be the third lowest this decade, given ongoing yield deterioration in Eastern Europe, particularly Ukraine. Furthermore, China has been signaling an increase in Soybean imports, which might also be a contributing factor.
Technically speaking, price looks to be pushing higher and charts have turned a lot more bullish in recent weeks following a historic fall to new lows over the last couple of years.
Hedge funds had cut their Corn short exposure, so some of these gains could be attributed to short covering coinciding with the news of lower supply out of Europe.
I feel Corn will rise to 440-450 in the short run, and additional gains look likely in the weeks ahead given this week’s progress.
Corn Future
GE Breakout- 3rd time’s the Charm?!!
General Electric Aerospace (GE 1.77% ) broke out of its well-defined five-month consolidation pattern on Friday, which marks the third breakout attempt in this stock since it failed back in July.
Today’s volume proved to be quite strong, similar to the one in July. However, that occurred as the broader market was making a short-term peak in price and stocks were sliding. Therefore, the breakout proved short-lived and ultimately false.
This time around, SPX is hovering just shy of all-time highs and stocks are showing improved momentum and market breadth. My thinking is this week’s breakout (Particularly given that it happened on a Friday which positively affects the weekly close) will be more beneficial to GE for progress in the weeks ahead.
Overall, GE remains part of my UPTICKS list and I expect a push-up toward $200 sooner than later as a result of this week’s progress.
GE Aerospace
