SPX’s technical trend, breadth, and momentum have slowly improved over the last two weeks, showing evidence of a “Two Steps Forward, One Step Back” type trajectory. Meanwhile, both TNX and DXY have begun mild bounces after the recent declines that both produced since the pivotal 1/13 inflection point (Bullish for Equities and Treasuries while bearish for the US Dollar). Equal-weighted SPX has been outperforming over the last couple of weeks, but this looks to prove short-lived and should aguably eventually lead to Technology regaining its footing after dismal performance from AAPL and NVDA. Overall, it’s premature to make the case just yet of a pushback to immediate highs given Wednesday’s roller-coaster type price action with Technology earnings on deck. However, it’s right to be positive into mid-February, looking to make use of any 2-3 day weakness as a chance to buy dips, expecting that pullbacks likely prove temporary and not too damaging. In general, I suspect that downside volatility, if it occurs in the days ahead, should create attractive opportunities for US Equities between now and Friday. Thereafter, SPX likely should turn back higher and begin a run towards 6300.
Wednesday’s FOMC non-decision failed to resolve the ongoing churning that’s been ongoing since last Friday’s peak. Wednesday’s minor pullback seemed to occur on schedule but then stabilized a bit into the close. Unfortunately, Wednesday’s price action does not help to add any credibility to the idea of an immediate rally.
Given important earnings from META, MSFT, TSLA on Wednesday, and AAPL earnings on Thursday, it’s important to still be patient before having conviction of a move back to new highs right away.
The hourly SPX chart below highlights this indecision, but it should be clearer by the end of the week. Areas to pay particular attention to lie at 6075-90 as an overhead zone of resistance. Conversely, 6013 is technically key on the downside, followed by 5962.
Despite the wave pattern still indicating a possibility of weakness into Friday/next Monday, I believe it’s best to let the patterns simply play out, as Wednesday’s close did not provide a great deal of clarity for bulls, nor bears.
The good news is that market breadth has improved in recent weeks, and sentiment remains subdued while the intermediate-term technical structure remains intact. Thus, weakness, if it does occur from Thursday into next Monday, should present attractive opportunities given the good likelihood of a February pushback to new highs for many US indices.
S&P 500 Index
As suggested yesterday, the ideal spot for SPX to bottom would be just under Monday’s lows (1/27), which might also find some support near the prior area of channel resistance from early December.
In extreme cases, SPX might revisit 5800-5850, but this is not necessary at the present time. All in all, I favor that mild pullbacks between Wednesday-Friday should represent a very appealing time to “buy dips” for those investors that care on the short-term tactical view.
Microsoft technicals have improved since early January, but the breakout would help add a lot of conviction for long
I felt it might be helpful to review a couple of the key stocks with earnings this week, given that many represent meaningful percentages within SPX, QQQ, and many ETFs.
MSFT, as shown below, has failed to do much since last Summer when the stock peaked out near $470.
Its pattern has morphed into a triangle formation, and I expect this to be resolved by a coming breakout above $455.
In the short run, MSFT is range-bound, and has traded down fractionally after-hours after its earnings on Wednesday.
Unless this undercuts $410, which I don’t expect, minor weakness should present an opportunity for MSFT, and a move back to challenge and exceed $455 looks likely in the months ahead.
While momentum has slowed in MSFT in recent months, the intermediate-term pattern remains in good technical shape. The ability to exceed $455 should drive MSFT up to $500.
Microsoft Corp.
TSLA remains in consolidation
TSLA, unfortunately, has been trending down following the surge from last October into December, which helped this gain more than 100%.
Fortunately for TSLA bulls, the consolidation since December has barely “made a dent” in the larger bullish technical structure, as TSLA has retraced only around 38.2% of the rally from last October into mid-December.
The wave structure looks corrective on the decline since that time. In plain English, this means that TSLA has traded lower in a choppy three-wave formation from 12/18 into 01/2, before attempting to turn back higher.
While it’s hard to say with conviction that this decline has run its course, this structure should eventually give way to a pushback to new highs.
In the near-term, $421 looks technically important, then $440. The act of getting above $440 should lead back to $488.54, in my view, while $373 looks important on the downside.
Until/unless $421 is surpassed right away, there still stands a chance of TSLA pulling back to test and break early January lows.
Momentum has been negatively sloped lately, and the stock has lost some allure for short-term trend followers.
As shown below, the Ichimoku cloud lows intersect near $350, which also lines up with TSLA’s 50% retracement of the prior October 2024-December 2024 run-up.
One cannot say with authority that $350 has been ruled out, given the after-hours bounce and recovery in the stock post-earnings.
However, movement above $422 will arguably be the first step for TSLA bulls, followed by the ability to exceed 1/17/25 peaks of $439.74.
At present, TSLA lies in a short-term downtrend as part of a larger bullish uptrend, and pattern resolution is necessary to help its Elliott-wave structure turn more bullish.
Tesla, Inc.
META is the technically most attractive of any of the Magnificent 7 stocks
While both MSFT and TSLA initially traded lower in the after-hours market after Wednesday’s close, META immediately turned higher.
While it’s important to await signs of where META opens and then closes Thursday, the stock was trading higher after hours, and I expect this to push up to $800 this year eventually.
In the near term, the price has gotten extended after the breakout from last week. However, in the absence of any counter-trend exhaustion signals and/or technical deterioration, trends remain positive, and any consolidation would make META more appealing, technically speaking.
Weekly RSI has just moved back over 70 in META. However, its symmetrical intermediate-term uptrend has been difficult to find fault with. META looks likely to push higher in the weeks and months to come, and any dips to $645-$655 would represent strong technical support on weakness.
Meta Platforms, Inc.
