SPX’s technical trend, breadth, and momentum began to turn more bullish late last week, and the move above SPX 6021 suggests a likely push to much higher levels into mid-February. Technically, short-term trends (between now and the end of January) likely will require consolidation ahead of a move back to new all-time highs, but Tuesday brought about zero evidence of any reversal of trend based on the close near the highs of the session. Given that Treasury yields and the US Dollar look to be near short-term support, and recent declines in both coincided with Equity strength, I expect that any backing and filling in the decline of both DXY and TNX (meaning rallies in both in the next week) also could temporarily result in Equities also showing some consolidation. For now, the rebound in Healthcare, Financials, and Industrials looks particularly important as positives that should carry SPX higher over the next 3-5 weeks. While the risk/reward doesn’t look as appealing between now and the end of the month, any ability to consolidate 38-50% of the rally that began last week should put the SPX in a very favorable risk/reward position.
Overall, Tuesday’s SPX close was certainly bullish, managing to exceed 6021 by the end of the day on the positive market breadth of roughly 5/1. Tuesday failed to show any stalling out in the trend from 1/13 lows, and it’s fair to say that shorter-term trends, breadth, and momentum have begun to turn more bullish in the last two trading sessions.
The flip side to all this, in my view, remains a short-term concern only. Momentum has begun to grow quite overbought on hourly charts and 240-minute charts of SPY show TD Sell setups. Furthermore, QQQ, along with the S&P Equal-weighted ETF (RSP -1.33% ) remain near a 61.8% Fibonacci retracement level and stocks like AAPL have been continuing to weaken in the short run.
As shown below, SPX did successfully break out where it needed to in the short run. As had been discussed, the consolidation since early December had been part of an ongoing bullish uptrend. Thus, both short, and intermediate-term trends have turned more bullish.
The only real concerns have to do with intermediate-term breadth levels being compressed, and in the case of MACD, momentum remains negatively sloped. My guess is that SPX will have a difficult time immediately getting over 12/6/24 peaks.
However, as to whether it’s worth trying to time short-term peaks to play a quick pullback, the answer lies in most investors’ risk tolerance and timeframe of investment. I don’t see SPX likely retreating more than 50% of the rally which began on 1/13 right away before likely pushing up above 6300.
S&P 500 Index
Healthcare’s rally is worth paying attention to
I had discussed last week that the decline in the Healthcare sector, given its weighting in SPX as the 2nd largest sector, had been quite detrimental for market breadth since last Fall.
This is now being quickly reversed as Equal-weighted Healthcare has just exceeded the downtrend since last September’s peak.
While I believe that Healthcare’s rally is a short-term mean reversion-related move, TD Combo monthly buy signals are indeed present on relative charts of RYH vs. RSP -1.33% , which likely could be confirmed by February’s month-end close. (Difficult for this to happen by the end of January)
I tend to like ISRG 2.98% , BSX 1.59% , A -1.77% , DVA -3.47% , WAT -2.59% , SYK -1.30% , MDT -1.13% , RMD -7.03% , VRTX -3.28% , and LLY -0.69% the best in the Healthcare space. However, both LLY and VRTX have shown some near-term weakness that needs to be addressed, and I’ll discuss these stocks technically between now and the end of the week.
S&P 500 EW Health Care Invesco ETF
Medical Devices has just pushed up to the highest levels since 2022
At present, stocks within the Medical Devices sub-sector look the most attractive in the short run within the Healthcare space.
I had mentioned ISRG, BSX, MDT, SYK, and RMD above, and these are all within the Medical Devices space.
Others that are lagging and aren’t as technically attractive just yet are ABT -3.43% , BDX -1.50% , EW -0.20% , IDXX -2.24% , DXCM, ZBH -2.97% , STE -1.50% , HOLX -4.62% , BAX -2.12% , and TFX 0.25% . It’s my view that these will take a bit more time.
As shown below, the Ishares Medical Devices ETF has just broken out to the highest levels in nearly three years but remains shy of all-time highs. I feel this is an excellent area within Healthcare, but it is still a sector that requires some selectivity in which stocks might outperform, technically speaking.
iShares U.S. Medical Devices ETF
Gold and Silver have diverged; Both might require consolidation, but Gold should be favored
Gold and Silver have diverged lately, with Gold breaking out of its trend from last October’s peaks while Silver has lagged sharply. Both might show some minor consolidation after these runups, but the patterns of both Gold and Silver should be favored for gains from February into the Summer, and there is a good likelihood of a pushback to eventual new highs above last October 2024 peaks.
Note that the pattern on the Silver chart (shown in yellow on this chart, Ishares Silver ETF SLV 0.20% ) looks almost identical to China’s FXI, both of which peaked out in October and have made lower highs. Overall, it looks a bit premature to expect this move to continue in Gold back to new highs right away, but one should consider Gold and Silver attractive on weakness over the next couple of weeks.
Given that both Gold and Silver look to be carving out bullish patterns from December lows, along with the fact that Interest rates are starting to peak out, gives me confidence that both can be favored.
My ideal target for Gold on weakness lies at 2640-2675, while Silver might consolidate to $30.25-$30.68. Once some backing and filling have taken place, the precious metals will look quite attractive for beginning their next leg higher towards all-time highs.
Resistance for Gold lies near 2790 in the short-run, while Silver likely should hold $33.30.
Overall, similar to SPX, I expect that the Precious metals bounce of late might need to pull back into late January/early February before starting to turn higher in a stronger fashion. I would look to own both Gold and Silver into Summer 2025, but pullbacks would make these far more actionable and attractive from a risk/reward basis.
GLD US Equity (SPDR Gold Shares)
