I want to wish everyone a very happy holiday season. I appreciate all your support and wish you a very happy New Year and a prosperous 2025!
SPX remains in a short-term bullish uptrend from last Friday’s lows as part of a mild period of bearish consolidation that began roughly three weeks ago. US Dollar and US Treasury yield trends are short-term positive after a push above November highs, and this combination might prove to be problematic towards the potential for an immediate rally back to new all-time highs in US Equities. While the bounce from last Friday’s lows likely should continue a bit longer into Thursday, I suspect that the US Equity bounce should face resistance into the end of the week, which might make 2024’s Santa Claus rally period turn out a bit more subdued or even negative this year.
Overall, the bounce into this year’s holiday season is under way but now seems to be nearing levels that might have some importance in causing resistance.
As discussed in recent days, December’s market breadth has proven to be some of the worst seen in months and has resulted in short-term along with intermediate-term breadth having deteriorated. While I expect this proves to be a short-term issue for US stock indices only, the recent rally from last Friday’s lows has not been overwhelmingly positive in showing meaningful breadth recovery.
Furthermore, Equal-weighted S&P 500 along with DJIA maintains far more negative technical structure following the decline from peaks three weeks ago (DJIA is shown in today’s report following QQQ) While many investors don’t pay as much attention to DJIA, it certainly is important to take into consideration when it diverges substantially from the movement of SPX and QQQ.
Finally, the Elliott-wave structure seems to indicate that Equity indices are not completely “out of the woods” on the recent corrective activity despite the bounce. This bounce looks very much like an “ABC”-type pattern that very well could result in prices pulling back to new lows for December ahead of a larger 1st Half 2025 rally getting underway.
Not to be overly “Grinch-like” during the holidays, there certainly remain some very constructive technical observations that are proper to mention, which suggest that any further consolidation likely proves short-term only in nature.
These positives have to do with the following:
- Technology continues to hold up quite well.
- Market sentiment has gotten more subdued lately.
- Longer-term uptrends are still very much intact on broader indices.
- Minimal evidence of any credit-related issues, with Junk bond yields near “record tights” compared to Treasuries.
- Ongoing evidence of Defensive sector underperformance, with Consumer Staples having pulled back to new yearly lows this week.
- Short-term cycle composite, which suggested weakness from late November into mid-December, now looks to have bottomed.
- Bullish seasonality in December.
- Formerly leading sectors like Financials and Industrials have pulled back to attractive support based on intermediate-term trends.
SPX’s hourly chart shows why 6035 up to 6055 might prove important this coming Thursday-Friday towards providing strong resistance to a rally. If this were to be correct, the price might have another day of rally this Thursday before stalling and turning back lower.
The key towards understanding whether this is serious or not revolves around 5900 being violated in SPX. If this were to happen, then I expect a move back to new monthly lows happens temporarily before any rally back to new highs can get underway.
Similar levels on QQQ lie at 516. These should be important levels to focus on for investors with shorter timeframes.
S&P 500 Index
Dow Jones Industrials trend breakdown has now snapped back to test this area of the breakdown
One of the reasons for concern on US equities month revolves around DJIA and also Equal-weighted SPX having shown far more weakness than SPX or QQQ.
As shown below, this breakdown of a four-month uptrend has now led to a bounce, which might find resistance later this week.
For DJIA, this lies near 43,600. If prices cannot get above 43,600 and then start to turn back down under 42,516, this could lead to 41,360 or even 40,750 before finding support and turning back to highs.
In my personal view, few investors anticipate a move of this sort, given the beginning of the market’s snapback in December. Yet, trends and momentum aren’t yet positive enough to give lots of optimism regarding the likelihood of a broad-based rally back to new highs just yet. Given December’s degree of breadth deterioration, keeping a close watch on price action in the days ahead is very important.
Dow Jones Industrial Average Index
What does AAPL say about the market’s prospects?
AAPL is always an important stock to monitor technically given its outsized influence within SPX and QQQ. Looking back, AAPL’s former breakout above $237 in late November proved to be a key reason to expect Technology to begin showing some good performance, and breakouts in AAPL are normally right to consider to be a “tailwind” for the broader market, given its 7% weighting within SPX.
As daily charts show below, AAPL 1.96% still looks great technically in terms of structure, but has just gotten stretched here. My opinion is that AAPL should move to 260-265 before stalling out and beginning a period of consolidation.
Warning signs on AAPL for me include:
- Short-term negative momentum divergence. AAPL has pushed higher to new highs in recent weeks, but MACD and RSI are lower than last month.
- Weekly RSI is at a 75 which has happened twice over the past year and both times marked short-term peaks and consolidation.
- DeMark-based sell signals are now present in AAPL on both a daily and weekly basis (COUNTER-TREND signs of exhaustion) but have not yet been confirmed. (This would require a weekly close down under the low close of four weeks prior, which would take some time. Weekly TD SELL Setups could be complete within three weeks, and I expect the stock could run up to 260-265 but should have a tough time exceeding that level.)
How one manages their positions given these possibilities depends on one’s risk tolerance and timeframe. However, from my perspective, I view the stock as a sub-par risk/reward on a 1-2 month basis, given its proximity to resistance. I don’t expect AAPL to eclipse 26,5, and consolidation might result in a decline to 245 or a maximum level near 240 by the end of February (which would likely signify an excellent risk/reward).
The area from this past July-October just below 240 is a very strong area on any correction. Reaching this level doesn’t look necessary. However, following seven of eight weeks higher, some consolidation looks overdue here and could happen by mid-February.
Apple Inc
