Equity trends from August remain bullish, and SPX has neared the upper edge of its four-month channel resistance while the NASDAQ 100 index has just pushed back to new all-time highs. Treasury yields and the US Dollar have both begun to wobble lately as December has gotten underway, but their sudden trend reversals have had scant negative effects on the current appetite for US Equities. Thus far, no evidence of consolidation has played out which lines up with cycle projections and lackluster breadth since September. Overall, while Sentiment, cycles, and DeMark signals, along with lackluster Technology participation, made SPX seem like a risky bet following its 15% rally in 15 weeks from August lows, there simply hasn’t been any evidence of price weakness. As the saying goes, it remains difficult to bet against uptrends in December. While I expect some consolidation in SPX before the price gets above 6100, it could be limited to 5950 given the recent breakout in stocks like AAPL, which are important to SPX and QQQ. Thus, for those looking, the timetable for a possible near-term consolidation could happen from 12/5 into December expiration before an end-of-year rally.
Similar to yesterday, market breadth was negative while SPX and QQQ found a way to rebound back to positive territory, which marked an official new all-time high daily close for the NASDAQ 100 index and QQQ 0.80% . While nine sectors out of 11 fell to close the day negative, large-cap Technology managed to “come to the rescue” on strength out of PLTR 22.77% , TER 0.14% , MU 0.65% , NVDA 1.98% , AAPL 1.96% , and ANET 2.42% , to name a few. Each of these managed to rally more than 1%, effectively disguising the weakness of Consumer Discretionary, Financials, and Utilities, which each fell more than -0.50%.
Overall, I find the rally back to new highs certainly constructive for the US broader indices, technically speaking. However, Equal-weighted S&P 500 fell for the third day of the last four and closed at multi-day lows. Furthermore, markets have definitely begun to show more evidence of US Dollar weakness (in the form of the Japanese Yen strengthening vs. USD), and Treasury yields are beginning to back off. Furthermore, the degree of currency and Fixed income-related volatility has begun to accelerate overseas, given the possible collapse in the French government and Martial Law roller coaster out of South Korea.
Thus, it remains an unusual environment for “the market” in the short run. Ordinarily, a move back to new highs for Equities is something to embrace, and it is. However, when indices are nearing the highs of their respective trend channels and breadth turns negative, then it’s often a time to pay attention. Similar to yesterday’s thoughts, it will be right to stick with this uptrend until proven otherwise, given no evidence of any technical deterioration in one of the most bullish seasonal times of the year.
Nasdaq QQQ Invesco ETF
Given that I showcased SPX in recent days, it’s only right that I give QQQ time in the spotlight given Tuesday’s close back at new all-time highs with Tuesday’s finish above the 11/11/24 intra-day peak of 515.58.
As one can see from this technical setup in the chart above, a push above a former peak that was made nearly a month ago normally has bullish implications. The only pushback to this thesis revolves around the possible formation of DeMark’s TD Sell Setup on Wednesday which formerly resulted in peaks in price back in mid-August as well as mid-July of this year. Furthermore, prices are nearing the highs of this trend channel for QQQ near $525, which likely coincides with 6100 on SPX. Overall, while no evidence of price weakness has been seen thus far, I expect the upper edge of this trend channel to prove temporarily important.
Magnificent 7 ETF also hits new highs above 52.58
Given that many of the top percentage names within QQQ are represented by the so-called “Magnificent 7” stocks, one would rightly expect the chart of Roundhill Magnificent Seven ETF MAGS 0.04% to look nearly identical to QQQ.
It does look similar, and price has just successfully hit new all-time highs. The rule of thumb as to how one treats a technical breakout to all-time highs is normally pretty simple: A close at new highs is bullish unless reversed right away to close back under the area of the prior peak. Furthermore, if this happens on a weekly close where the price cannot exceed this area, then it takes on additional importance. At present, projections of this current move signal an eventual rally to near $56.64 which represents a 61.8% alternative Fibonacci retracement from the 11/15 lows of the prior 9/6-11/11/24 rally.
Roundhill Magnificent Seven ETF
Coffee’s 47-year breakout likely could show strength into next Spring before reversing
The Coffee “C” futures contract (the world benchmark for Arabica Coffee) just broke out last month to the highest levels since the early 1970’s, and monthly charts help to shed light on this monstrous technical base, which has been forming for 50 years.
This looks to be a very constructive long-term base breakout for Coffee “C” and given the combination of the EU Anti-Deforestation low coupled with possible tariffs, makes for a strong case why prices could head even higher into 2025.
(The European Commission and member states will need to clarify what this deforestation law means when this EU law comes into effect in a few weeks’ time. But apparently, any coffee roasters selling into the Bloc will have to provide geolocation data to prove the origins of their imported beans. Prices could be set to Squeeze higher even with CFTC data showing hedge funds having piled in to bets on rising coffee prices. (KC 0.26% 1) (KCA))
I expect that Coffee “C” futures should be able to push higher above $4/lb. in the months ahead but might reach a peak as of next April. However, given the extent of this long-term base, high volume breakouts of the sort normally can create an attractive technical long, and at the very least, make this upcoming EU law along with Brazil’s weather and Trump’s possible tariffs something to watch carefully.
Coffee “C” futures
Coffee “C” Futures cycle composite points higher until next Spring before retreating
I ran my cycle composites on Coffee prices going back since 2000 and found some interesting results when utilizing a 185-week cycle combined with a 143-week cycle and a 287-week cycle.
These three cycles when combined seem to have pinpointed many of the former highs and lows for Coffee and seem to suggest that higher prices are still quite likely in the months ahead.
However, the composite does look to turn lower in the month of April next year, so I expect that any upside acceleration will likely be met with resistance into next Spring before a decline.
Coffee “C” Futures Cycle Composite
CFTC Asset Manager Institutional Long contracts for E-Mini S&P 500 have now hit the highest levels in years
When eyeing Bloomberg’s TFF1NAIL index from the Commitments of Traders reports (COT), I find it interesting that the long positioning has now reached the highest levels since at least 2013 and looks to be firmly at the high end of bullish positioning.
While other times of Bullish S&P positioning like 2010, or 2013 failed to result in any serious market downturn, other occasions like 2018, early 2020 and 2021 certainly did coincide with market turbulence.
Overall, my sentiment gauges remain rather mixed heading into year-end. Some gauges like AAII, or Fear and Greed Sentiment, have contracted from the bullish readings seen in early November ahead of the US Election.
Other measures like CBOE Equity Put/call ratio, a VIX near 13, along with institutional long positioning, seem to be more extreme. This is just one piece of the sentiment puzzle, but positioning in long S&P Futures contracts certainly did escalate following the Election, and has reached levels which warrant some “Market sobriety” out of investors despite the Holiday season being upon us.
TFF1NAIL Net Long
