Equity trends from August remain bullish but yet remain lower than recent peaks from mid-November on 11/11/24. Tuesday’s stabilization is suggestive of a bounce in US Equities between now and next week’s Thanksgiving holiday. Treasuries also seem to be turning higher, and it’s thought that both Treasury Yields and the US Dollar might retreat into December following the unraveling of the so-called “Trump trade”. All eyes are on NVDA’s earnings Wednesday as a possible catalyst for Technology, and it seems important that NVDA, along with former leaders like AAPL, help Technology begin to strengthen after several choppy months. Importantly, given the shape of the decline from 11/11 peaks, there stands an above-average chance that gains into next week might still give way to weakness into the first week of December before any meaningful low is at hand.
Overall, I’m encouraged by Tuesday’s brief dip to new weekly lows before the strong recovery, which was seen by DJIA, S&P Futures, and NASDAQ Composite. This suggests that a short-term low is likely in place.
Elliott-wave theory combined with technical support based on the structural pattern of the most recent rally both argue for a likely bounce. However, this remains a choppy period for Equities given the breadth deterioration of late, and one cannot yet say with confidence, given Tuesday’s early pullback, that a move to new highs is imminent.
Specifically, the following are problematic on a three-week basis:
Technology has remained in consolidation mode since July and has been lower over the last month. Until stocks like AAPL and MSFT begin to act better, and potentially NVDA delivers on earnings, trends for Tech remain neutral in the short run.
Market breadth remains decidedly mixed, not bullish. One would think that following the Election, a sharp rally back to new highs would have ensued. This did happen, of course, yet it was marked by far lower breadth than anticipated.
Elliott-wave structure seems to show a completed five-wave decline from November 11 on hourly charts in IWM 0.61% , DIA 0.01% , S&P Futures, and NASDAQ Composite. This should mean that a counter-trend snapback is due between now and next week’s Thanksgiving holiday. However, it also means that another “wave” down is possible from 11/27 into the first week of December.
Cycle composites for SPX show a declining trend from mid-November into mid-December before a lift into year-end. I expect this either bottoms on 12/5-6, or 12/15.
Overall, while the intermediate-term prospects for SPX, and NASDAQ remain bright into next year, I don’t suspect that it will prove to be an easy final seven weeks higher for the US Equity markets.
QQQ’s chart, as shown below, looks to have bottomed and should be expected to possibly lift to 508 into next week, with a minimum expectation for a rally to 505.
Invesco QQQ Trust
NVIDIA is being counted on “to save” Technology after a difficult stretch.
As seen below, the SPX’s largest constituent at present, NVDA 3.16% , lies roughly 7 points from where it peaked in late June.
Trends remain certainly positive in the short run, and technical trends are bullish following the breakout back to new highs in early October.
However, the short-term negative momentum divergence is a minor concern, but it can’t be called all that bearish until/unless the price slips to undercut $132. If this were to happen, NVDA likely would face short-term weakness to $125-6 before rebounding. Furthermore, it’s a minor concern that SOX (Philadelphia Semiconductor index) lies nearly 13% under its all-time highs from mid-July. As many know, despite NVDA’s rebound, SOX has not performed all that well likely.
On the upside, given the ongoing uptrend and no discernible evidence of trend damage, I’m more likely to expect pushback to new marginal highs with targets at $158-$160.
Technically, I’m not inclined to suggest a high conviction likelihood of gains following earnings, given that the trend has begun to falter, momentum-wise, following a push-up from near $100 to $146.97 in a bit more than 10 weeks.
However, this remains a leader within Technology and is relatively overweight compared to the SOX index. Thus, while many are wondering if NVDA or the SOX are showing the true message for this market, I simply believe in owning NVDA into next spring and consider any near-term weakness down to the mid-$120s as making NVDA quite attractive technically.
NVIDIA Corporation
SOX down 13% since mid-July; Now what?
As discussed, SOX has proven to be far choppier in recent months and lies over 13% off all-time highs from four months ago.
Yet, many times, these consolidation patterns do not lead to meaningful peaks but just a “pause that refreshes” before pushing higher.
Any weakness down to 4300-4500 would represent an excellent technical opportunity for SOX, which has been struggling in recent months. Conversely, any move back above 5450 is needed to reassert this uptrend back to challenge July peaks (which for now looks premature).
PHLX Semiconductor
USDCAD very well could peak out despite a stellar intermediate-term chart
Interestingly enough, the economic data for Canada followed a similar path for the US, and headline CPI’s 2% reading (better than expected) casts skepticism on BOC’s plan to cut rates another 50 bps in December.
Technically, the breakout of this two-year base would ordinarily be considered quite bullish.
However, three reasons suggest this breakout very well might prove false and reverse course:
- Sentiment looks very extreme on the Canadian Dollar with very stretched short positioning (Shown in yesterday’s CFTC chart).
- The US Dollar should begin to peak out and turn lower to follow the move in US Treasury yields over the next month as the Dollar begins a period of seasonal weakness.
- DeMark’s Weekly indicators like TD Sequential and TD Combo show exhaustion signals on USDCAD charts, not dissimilar from what was present in July 2024, October 2023, and October 2022, which each ushered in peaks and pullbacks.
Overall, this should be something to watch carefully in the weeks to come, but my thinking is that a pullback to 1.34-1.36 is very well possible before additional gains in USDCAD. (Thus, the Canadian Dollar should begin to rally.)
