Short-term trends turned back to bullish following last Wednesday’s close above 5525, and Equal-weighted S&P 500 has just moved back to new all-time highs. 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 this week into the 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.
Similar to the trend that began back in early August, US Equity markets are showing much better performance than what SPX and QQQ might indicate.
Given Semiconductor stock weakness along with AAPL’s decline, QQQ showed a fractional loss during Monday’s session.
However, it’s important to relay that Equal-weighted S&P 500 did rise to a record high today and all 11 sectors finished higher ahead of this week’s important September FOMC meeting. Technology based on the heavily weighted XLK -0.56% fell -0.38%, but is not thought to be a perfect gauge for Technology in a broad-based sense.
AAPL along with SKYW 1.74% , QRVO -6.68% MU -4.52% , ADBE -2.71% , and MPWR -3.16% all fell more than 2.5%. Thus, Semiconductors were weak today, but the broader market is acting fine, with Financials, Energy, REITS, Industrials, and Utilities all higher by more than +0.50% and even Healthcare is up by +0.62% when eyeing these sectors in Equal-weighted terms.
Overall, US Benchmark indices like SPX and NASDAQ failed to show the underlying broad-based strength which carried RSP 0.76% back to new all-time highs on Monday.
Thus, ahead of this week’s important FOMC meeting, it’s just important to drill down on what’s moving and always “look under the hood” to gain an accurate picture and roadmap for the weeks ahead.
Given that prices have neared the apex of this triangle, it’s safe to say that the months ahead might offer a bit more volatility than what’s happened since July. However, this doesn’t have to constitute just downside volatility. At present, without proof of a major reversal, the odds still suggest an impending breakout. We’ll monitor the breadth and participation and structure of any breakout in the days to come.
S&P 500 Index
Stock performance ahead of this Fed easing has proven robust
The rally back to within striking distance of all-time high territory before the FOMC meeting represents the strongest 12-month performance heading into a Fed easing cycle going back since 1987.
As the table below shows in the rate cuts since 1987, the recent 26% gain over the past year ahead of the Fed’s impending rate cuts are the strongest since 1987 and one of the strongest since the 1950’s. (Latter table not shown.)
Outside of the bear market periods of 2000-2003 and 2007, Stock performance has largely been positive post Rate cuts in the 3-month, 6-month and 12-month periods after.
While the Swaps market pricing suggests the percentage chances for this week’s FOMC meeting are right in between 25 and 50-basis points, this also means that the market will be somewhat surprised one way or another regardless of what the FOMC does.
This largely explains why the SPX-5650-60 area could represent strong near-term resistance. However, I suspect that should prove short-lived given the strength of the current breadth data and short-term momentum.
Stock Performance Before and After Onset of Fed Easing
AAPL pullback carries lots of weight; Yet, Insufficient damage has been done for much worry
AAPL’s Monday weakness proved to be the largest for this stock in over one month’s time.
However, as daily AAPL chart shows below, this doesn’t appear like a big deal technically following a very encouraging rally from early August to back near all-time highs.
Similar to SPX, and QQQ, and even IWM, its pattern has morphed into a Triangle which eventually should be resolved by an upside breakout.
As shown below, Monday’s intra-day weakness held the upper end of the current Ichimoku cloud and it attempted to bottom. This also is an area that approximates AAPL’s 50% retracement area of the prior rally.
Thus, AAPL looks to have bottomed where it needed to in the short run. While it’s tough to promise that this will never go back lower into October, I feel that $213.92 is important and under this level on a close would lead briefly down to $208.
Conversely, it’s right to keep $224 on the radar, as a daily and particularly a weekly close back above $224 would be instrumental in likely leading to a move back to new all-time highs for AAPL. At present, it’s right to remain bullish and I consider AAPL attractive on recent weakness.
Apple Inc
Copper breakout could lead this back higher into Fall
Copper has successfully made two constructive technical moves that are worth highlighting:
- Copper’s breakout of the downtrend from May has helped this to strengthen.
- Copper’s move back above late August highs today is also a bullish technical development.
The next key step is for Copper to reclaim the area from late June which served as a prior swing low ($4.32 on charts of generic Copper Futures). Such a development would give lots of conviction towards the idea of a push back up to $4.70 is underway and a possible move back to new highs.
While the weakness from May has made Copper difficult to embrace, the stabilization and rally in Copper is worth keeping a close eye on during a time when China has also tried to hold support lately after a difficult period.
Copper Futures
