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 US Dollar). Equal-weighted SPX has been outperforming over the last couple of weeks, but this looks to prove short-lived and should eventually lead to Technology regaining its footing after a dismal performance from AAPL and NVDA. Overall, it’s premature to make the case just yet of pushback to immediate highs, given the lack of sufficient structural progress and notable weakness in some large Technology stocks. However, it’s right to be positive into mid-February, looking to make use of any weakness into next week as a chance to buy dips, expecting that pullbacks likely prove temporary and not too damaging. In general, I suspect that downside volatility should create attractive opportunities for US Equities, but at present, SPX remains in consolidation, which cannot be called complete.
The US Stock market remains in consolidation mode, despite the bounce that’s occurred in recent days. Price remains below peaks made in mid-December, and key stocks like MSFT, NVDA, and AAPL are not yet healthy enough to lead a broad-based move higher.
As mentioned, there remains some lagging in the Equal-weighted S&P 500 along with Russell 2000, DJ Transportation Avg, and DJIA, which have not made the kind of rebound that the SPX has enjoyed in the last week.
AAPL’s earnings could have served as a possible catalyst, but the miss in the iPhone estimates, along with their lackluster China sales, seem to be “Keeping a lid” on the stock in the after-hours.
Despite the wave pattern still indicating a possibility of short-term weakness, it is best to let the patterns simply play out, as the price in both SPX and QQQ remains under all-time highs from December and has proven more range-bound lately than bullish or bearish.
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 into early February, should present attractive opportunities given the good likelihood of a pushback to new highs for many US indices.
Daily QQQ charts show this ongoing consolidation, which is a source of consternation to “Market Bulls and Market Bears” alike. While most remain eager for its resolution, it will take time. Specifically, upside breakouts likely depend on some stabilization out of MSFT and NVDA, which at this time cannot be called complete. AAPL also has stalled out after its runup this past week and faces some resistance near current levels (More on this later in the report)
Bottom line, for optimism about QQQ, a daily close above $533.79 is necessary. Conversely, market bears need to see movement under $510.75. Until this happens, it’s not wrong to call this pattern a short-term neutral consolidation that started in mid-December.
Invesco QQQ Trust
AAPL cannot yet be called “Out of the Woods”
A couple of important points on AAPL need to be discussed, which I’ll list in bullet form below:
–AAPL has not yet recovered the bullish uptrend, which broke earlier this month. Weekly closes back above $240 are thought to be important in this regard.
–Weekly momentum remains negative, given the 15% selloff since late December. (MACD)
–The area at $240 looks to be strong resistance and shows symmetry with prior peaks from last October and July 2024.
–Cycles have a negative trajectory for AAPL. (This doesn’t mean the US Stock market nor Technology needs to fall; However, this might translate into other stocks and sectors showing more strength at a time when AAPL is undergoing consolidation.
As the weekly chart shows below, AAPL has its “work cut out for it” following its breakdown earlier in the month, which led to a subsequent retest of the area of the technical breakdown.
Important levels for AAPL in the weeks ahead lie at $240 on the upside and $219.38 on the downside. Any break of $219.38 would be problematic for the possibility of short-term upside to get underway immediately and should postpone an immediate move back to highs.
While I don’t feel it’s right to be bearish on AAPL, I do feel it’s important for this to regain its uptrend sooner rather than later. Furthermore, any act of undercutting $219 would likely result in AAPL testing $209, then a larger intermediate-term area of support near $200.
Apple Inc.
EEM breakout happening sooner than expected
While the US Dollar has bounced a bit in recent days, given the weakness in the Mexican Peso and Canadian Dollar, the Ishares Emerging Market ETF (EEM) looks to be trying to break out.
This hourly chart since mid-December resembles a reverse Head and Shoulders pattern, which has just been exceeded as of Thursday’s close.
While the area near $43.40 has not yet officially been exceeded, I feel it’s right technically to consider EEM attractive following the breakout of this hourly chart.
Rallies back to $45.10 and then $47.44 should get underway in the near future. Moreover, once the US Dollar index (DXY) starts to turn down in earnest again in the weeks ahead, I suspect EEM will begin to trade higher more aggressively. (DXY looks to have made a completed 5-wave decline and is now bouncing, which should be complete over the next week)
The key takeaway here is that EEM looks technically attractive and it looks right to consider EEM attractive despite the official close back over $43.40 given the progress in the shorter-term pattern.
iShares MSCI Emerging Index Fund
China’s Ishares Large-cap ETF (FXI) breaks out
The EEM breakout has positive implications for Chinese Equities specifically given that Chinese equities represent about 30% of the EEM ETF.
This week’s breakout looks to be the most important development for Chinese Equities since the rally from last Fall carried FXI to new monthly highs.
The breakout of an ongoing downtrend is considered bullish and should initially carry FXI up to challenge $33.75, then $37.50.
FXI looks more appealing to me than MCHI or KWEB, and the ratio chart of FXI to SPY has slowly been showing more evidence of bottoming out (Not shown).
Overall, China looks attractive again following a four-month consolidation after last year’s breakout.
iShares China Large-Cap ETF
