SPX’s technical trend, breadth, and momentum began to turn more bullish late last week, and the move above SPX 6021 has now pushed up to challenge all-time highs. Technically, short-term trends (between now and the end of January) likely will require consolidation ahead of a broad-based move back to new all-time highs, and Wednesday’s negative breadth was an interesting development given the renewed pushback into the Magnificent 7/AI stocks. DJIA, RSP, and IWM all remain underperformers on this bounce, and TNX and DXY are now nearing short-term technical support. For now, the rebound in Healthcare, Financials, and Industrials look 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.
No real change of thinking in recent days, as SPX has managed to push back to new highs at a time when IWM, DJIA, RSP have largely gone sideways since this past Tuesday. As discussed, technical trends for US Equities have turned more bullish, and a move back to new all-time highs in many US indices seems to be underway.
In the short run, however, there appears to be some serious degree of lagging in Equal-weighted S&P 500, Russell 2000 ETF (IWM) along with the DJIA. Each of these has managed to rally to the exact 61.8% Fibonacci retracement area of the pullback since December 2024 highs, an area of short-term resistance.
Technology has been an important driver of US index returns this week while it’s been constructive to see Industrials and Financials both show more strength after recent lagging since the US Election.
As discussed earlier this week, both DXY and TNX will continue to be important to watch carefully, given the negative correlation with SPY. Given that the bottom for equities occurred last Monday at a time when both DXY and TNX peaked, it’s thought that a bottom in either the US Dollar or Treasury yields might be something that coincided with near-term consolidation following the 5% runup in SPX.
As this hourly SPX chart shows below, the wave pattern on this first move up “seems” to be near completion based on both the bottom from 1/13 lows as well as the more recent bottom from 1/17 lows of this current advance.
While a bullish stance looks prudent into mid-February at a minimum (as part of a larger 1st half-2025 rally), I’ll be on the lookout for the following into next Monday/Tuesday:
- Further evidence of short-term breadth drying up.
- Evidence of SPX 6051 being broken (the area near the recent open gap from Tuesday).
- Evidence of DeMark-related 60 and 120 min exhaustion signals being confirmed, potentially lining up with daily TD Sell Setups which could form within two more trading days.
- Further evidence of IWM and/or RSP showing severe divergence to SPX (trading lower while SPX attempts to push higher).
This breakout certainly is a positive for SPX, but chief worries revolve around the lack of breakouts for DJIA, RSP, QQQ, IWM, along with negative weekly momentum, and low intermediate-term market breadth. These are short-term concerns only and technical strength into February which is broad-based should help to erase many of these concerns.
S&P 500 Index
Overall, I don’t see SPX likely retreating more than 50% of the rally which began on 1/13 right away and might stall on consolidations into FOMC near 38.2% Retracement levels. Thereafter, a push-up to 6300 should get underway.
Industrials strength is very encouraging
The lackluster performance of many of 2024’s early “winners” came to an abrupt end into the 2024 Election, and underperformance in quite a few sectors happened into mid-January from mid-November 2024.
This looks to be ending, and sectors like Industrials, when viewed on relative charts of Equal-weighted Industrials vs. Equal-weighted S&P 500 (RSP) never broke their ongoing uptrend on the minor consolidation from last November.
Since that time the sector has been able to turn sharply higher, thanks to stock performance out of GE MMM UNP CAT and DE to name a few.
Industrials remains a technical overweight and its strength is encouraging towards eventually seeing a broad-based rally get back underway.
RSPN/RSP
Bitcoin strength range-bound pattern should be watched carefully
Given the plethora of questions surrounding Bitcoin I’ve received lately, I felt it might be necessary to expound upon my thinking of Bitcoin’s technical pattern and what might be in store.
(I’ll be doing a video on Cryptocurrencies in the near future for Sean Farrell’s Digital Assets team, which will break down some of the technical trends and cycles of some of the leading cryptocurrencies that might be of interest.)
While the switch to a new Administration has brought certain promise of the potential of Deregulation to cryptocurrencies given the departure of Gary Gensler, the real question is how short-term fundamental and macro events should affect Cryptocurrencies.
In my view, that’s always proven tricky, and I tend to rely on technical trends, cycles and sentiment (largely in that order) as a way to try to predict price trends and potential targets.
Many felt that Trump’s executive orders related to Cryptocurrencies might bolster the space, which at this time has failed to break the current short-term range-bound pattern.
To recap my discussion at the 2025 Annual Outlook presentation, I am bullish for Bitcoin for 2025 and expect higher prices. My technical targets were $135-$139k, and then $153k for Bitcoin for 2025.
However, I did discuss earlier this month that a possible downward swoon might be possible which should begin towards end of January and last potentially into March before bottoming.
If this were to happen on schedule, it should lead Bitcoin to $74-$83k and potentially $63k or $52k before bottoming and turning back higher.
As shown below on daily non-logarithmic Arithmetic charts, the pattern of Bitcoin remains range-bound after the early month push to $108k followed by two separate attempts to rally which have since both retreated.
This near-term pattern is neutral, not bullish, nor bearish, as part of an intermediate-term uptrend for Bitcoin.
The two areas on the downside I feel are important support lie at $101k and then $91k, with the latter being more important.
If $91k is broken, it’s highly likely that a short-term bearish downtrend should get underway that wouldn’t find much support until $83k initially. Thereafter, the shape of the pattern would decide whether a further downside acceleration would be possible to $63 or $52k.
On the upside, a move back over $109,356 cannot also be ruled out given the short-term trading range within an ongoing uptrend. Exceeding this would likely postpone any correction while BTCUSD rallies a bit more.
Bitcoin / U.S. Dollar
Bitcoin’s Elliott-wave count looks most like an ABC-type corrective pattern, which is underway since mid-December 2024
The shape and pattern of this recent consolidation highly resembles a possible ABC pattern in the making, in my view.
If this were to prove correct, then rallies likely would fail to make much ground higher before turning down in February and beginning a five-wave decline into March.
This chart below is a daily chart which was made back on January 13th, before the bounce has begun over the past couple weeks.
To confirm this thinking of what my downside scenario has laid out, price will need to undercut $91k over the next few weeks, while not exceeding $109,356.
Bitcoin / U.S. Dollar
Bitcoin cycle seems to move lower into March before bottoming
While this won’t be a popular view given the massive amount of bullish sentiment on Bitcoin right now, the cycle composite currently shows a possible downdraft in the month of February.
This cycle involves a 277-day, 186-day, and 223-day cycle, which, when combined as a composite, give a negative downward path over the next six weeks.
While the pink line represents Amplitude, not magnitude, and doesn’t require a pullback to test 2024 lows, the change of trend happened on schedule in December 2024, similar to how it showed a low into mid-2024 and also several prior successful highs and lows in recent years.
Given that amplitude doesn’t necessitate a downdraft but might occur simply as sideways consolidation, not dissimilar from March-October 2024, one can’t also rule out this scenario between now and March.
Bottom line, the key takeaway is that given sentiment and cycles, the trend seems to turn down starting in about a week. Technical trends do not yet indicate a bearish trend but would be confirmed as a negative on any violation of $91k.
It’s important for investors to simply pay attention to the recent range while understanding the current cycle that has proven successful in years past. (As we know, this doesn’t necessarily mean this will happen in the future.)
Bitcoin Cycle
