US Equities remain on good footing, despite the recent backing up in US Dollar and US Treasury yields over the last couple of weeks. Both SPX and DJIA have successfully pushed back to new all-time highs, and NASDAQ should approach its own all-time highs within the next week. Moreover, most of Europe along with Japan is now signaling that a coming pushback to all-time highs could be getting underway. Overall, I expect that risk assets should still work well into October expiration before a possible stall out into a traditionally very negative seasonal week for stocks. For now, technical structure, momentum, and breadth have improved markedly in recent weeks, while sentiment is not yet bullish enough to think Stock indices might peak out. SPX target lies at 5835, and QQQ should find resistance at 503-505.
This past week has proven quite bullish for SPX and DJIA market structure, and Equal-weighted SPX just broke out Friday back to new all-time highs. QQQ finished at the highest levels since July while both IWM and DJ Transportation Average rose to multi-day highs.
Specifically, the breakout in Financials on Wednesday of this week on an Equal-weighted basis helped this group act quite positively on bullish earnings results out of JPM, WFC, and BK on Friday to kick off Bank earnings.
However, it’s been Technology’s snapback that’s proven to be the most impressive following a lengthy period of consolidation since July. Many had written off this sector’s attractiveness given the lagging behavior in stocks like MSFT, GOOGL and AMZN. Yet, SPY actually outperformed RSP this past week specifically given the strength in Technology which proved to be the 2nd best performing of all 11 sectors.
As discussed in recent days, the comeback in Financials, Industrials, and Consumer Discretionary over the past month has been thought to be quite constructive to help market breadth rise to very high levels during a time when the investing public harbored doubts about the market’s ability to rally through this seasonally tough time ahead of the US Election.
The positives continue to revolve around the following:
- Technical market structure – SPX, RSP, DJIA at new all-time highs
- Positive market breadth
- Intermediate-term sentiment that’s less than bullish
- Strong 4Q seasonality
- Market cycles which have an upward bias until 10/17-24
- No counter-trend exhaustion “Sells” present on Equal-weighted SPX nor QQQ
However, there are a number of negatives that have been growing, and it’s important to list these and keep them “on the front burner” so to speak.
- Intermarket divergence (NASDAQ not yet at new highs), not DJ Transportation Avg., or Russell 2000
- Negative weekly market divergence – SPX has moved to new highs, but weekly RSI is not, and has been trending down in recent months
- Short-term sentiment gauges show a lack of bearishness. AAII bears were 20% last week
- DeMark-related exhaustion could appear next week on RSP on weekly charts and is present now on SPX. (but not confirmed)
- Late October seasonality is quite bearish for October in Election years
- Break in correlation between Stocks and Treasuries and both DXY and TNX have pushed up sharply over last couple of weeks.
QQQ -0.25% as shown below, has an excellent chance of pushing higher to 500 next week but is thought to have a difficult time in immediately getting above 505. Thus, rallies into next week are likely to encounter strong resistance, and July highs at 503.52 is an important level to monitor, with initial psychologically important levels found at 500.
Invesco QQQ Trust
Overall, the preponderance of the evidence still shows the broader US Stock market to be in good shape, with not many intermediate-term warnings. However, over the next 1-2 weeks, there looks to be an increasing likelihood of a short-term market peak which might materialize in October, leading to minor weakness into early to mid-November.
At present, I suspect that this could start to bring about a short-term peak on/near 10/14 at the earliest, with an ideal time on 10/17, and also 10/28 has importance cyclically, followed by weakness into November. Until SPX breaks its 10-day moving average, currently at 5748, I don’t suspect it’s proper to pay attention to the warnings, and it’s still right to expect higher prices into next week. However, once price starts to show evidence of jitters, then a consolidation period might be getting underway. I’ll discuss this once evidence appears.
Performance data shows the strong rebound in Technology but good strength in Industrials and Discretionary lately
The key takeaway, performance-wise, is that many sectors have shown good strength lately, which is not typically what happens during the September/October timeframe in Election years.
I’m encouraged by the degree that other sectors have stepped in to “bail out” Technology over the last month. However, Tech now seems to be roaring back and doing quite well over the past week. As shown below, Equal-weighted Tech has been the 2nd best-performing sector behind Energy.
Friday’s performance was dominated by Financials and Industrials strength, and it’s important to keep a close eye on Industrials. However, given that market breadth normally begins to wane ahead of a larger stock market setback, what’s happening lately seems to be the opposite.
Invesco S&P 500 Equal Weight ETF
UBER has just broken out to new highs, as TSLA’s loss is UBER’s gains
-UBER’s breakout to new highs this week keeps the technical structure quite bullish
-Volume expanded this past week to the highest levels since August
-Weekly RSI is not yet at overbought levels and has not yet reached levels hit back in March 2024.
-Upside targets lie near $93.85 initially and then above near $104 and $117
-Any pullback down to the low $80’s into November should represent an attractive opportunity for UBER.
-Only declines under $71.90 would serve to damage the technical structure, which improved on this past week’s pushback to new highs.
Uber Technologies, Inc.
TSLA selloff should mark a buying opportunity
–TSLA’s decline on Friday failed to cause any real technical deterioration.
-Friday’s (10/11) open gap lower was marked by higher volume, which might temporarily postpone a move back above $265.
-Bullish uptrends from April remain intact for TSLA, and this recent consolidation should mark a higher low than August and translate into a very attractive opportunity for TSLA between Election time and next Spring.
-Support is likely to materialize near $208 and it’s doubtful technically that TSLA undercuts $200.
-Movement back above $232 is what’s required to help re-establish the near-term bullish momentum from August.
-Key resistance for the months ahead lies near $265. Breakouts above this level which I expect should happen between late October and next Spring, should result in upward acceleration which should eventually help TSLA push back to new all-time highs.
Friday’s weakness looks like a temporary setback only but puts TSLA in a far more advantageous position for intermediate-term investors.
Tesla, Inc.
