Recent selling pressure could be nearly complete after having pulled back to test early February lows. Short-term momentum has gotten oversold, and many key large-cap Tech stocks look to be in/near support. Furthermore, Treasury yields and the US Dollar have been breaking down sharply and I don’t see the correlation between Treasuries and Equities reversing anytime soon. Moreover, sentiment has continued to grow more and more negative, given the constant rhetoric regarding tariff uncertainty, and the larger intermediate-term uptrends for SPX remain very much intact. While I view a technical violation of February lows as about a 50%/50% chance, given that momentum has been so strongly negative over the last four days, I feel it’s right to position long and simply expect that any further selling won’t prove too severe for the last few days of February before beginning a sharp rally up into March. Overall, I suspect that NVDA’s earnings very well could prove to be a positive catalyst for Technology and Equity indices after this sharp near-term downturn.
SPX lows could be near based on the following reasons:
–Selling pressure looks to be abating as Tuesday’s market breadth was positive with nearly a 3/2 lead in Advancing vs. Declining stocks on the NYSE. Six of the major Equal-weighted sectors within SPX (out of 11) closed positive on Tuesday.
–Treasury yields have begun to break down even more sharply in the near term, and TNX’s undercut of 4.40% likely leads to 4.25% before a minor bounce.
–Stocks like META, AMZN, NVDA, GOOGL, and MSFT are all nearing support, and AAPL has proven quite strong, having risen to new multi-day highs as of Tuesday’s close. (A quick scan around the top 20 capitalization stocks within SPX shows short-term weakness nearing intermediate-term uptrend lines. That’s different from intermediate-term trends being broken in a way that would lead to much further intermediate-term declines.)
–Elliott-wave analysis shows a fairly distinct five-wave decline from 2/19 peaks, which should be nearing completion this week. (It’s difficult to know if any late-day rally marked “the bottom.”)
–Short-term cycles bottom and go higher into early March. Given the short-term cycles that have governed minor stock market bottoms over the last four months, the middle part of the month served as important time-based support during November, December, January, and February. Thus, it would make perfect sense for SPX to bottom and begin a sharp rally back into March ahead of a possible dip into 3/14-21, near the Spring Equinox.
–Intermediate-term uptrends from last August 2024 lows and from October 2023 lows are bullish, and have not been broken in SPX. Furthermore, patterns in QQQ remain within triangle consolidation, and it’s thought that this week might provide a low to this recent weakness.
S&P 500 Index
-Sectors that are important for SPX by market capitalization, like Healthcare, have been showing above-average strength early this year, with Pharmaceutical stocks being the recent example of a sub-sector breaking out and showing good recent relative strength.
-Equal-weighted S&P 500 has been gaining ground on SPX and QQQ in recent days, trading well above early February lows and showing near-term relative strength. While I suspect that QQQ is close to bottoming relative to RSP and turning sharply higher, I see it as a near-term positive that the broader market is “hanging there” despite some Technology weakness.
SPX weekly chart reminds us all that it’s just been two weeks of weakness, and trends remain in good shape
A quick look at SPX’s weekly chart helps to add conviction that this recent pullback hasn’t proven too damaging, as uptrend lines have not been breached and remain very much intact.
While this might eventually change at some point this year, I don’t view the selling in February to have taken inflicted much damage to the broader bullish trend.
S&P 500 Index
Treasury yields continue to work their way lower
Treasury yields have officially broken down under 4.40%, which should drive yields down to 4.25%. TNX is now down 6 consecutive weeks, the longest streak in 5.5 years.
I expect this first three-leg decline could find support near 4.25, which lines up with Ichimoku support, and that it will be an area where the two legs of this decline will be equal. Then, following a bounce, I expect an additional pullback in TNX in the months ahead.
US Government Bonds 10 YR Yield
NVIDIA looks likely to push higher post-earnings
NVDA’s earnings tonight stand to be the most widely anticipated event of the week due to its potential impact on both Technology and the broader market. Many continue to question if the AI trade is intact, and “the Street” is looking for $38b in revenue and $0.85 cents in Earnings per share (EPS).
As seen below, despite the choppy, range-bound technical pattern for NVDA since last Summer, the intermediate-term trends remain in good shape.
As shown below, NVDA now lies roughly 15% below all-time highs, and has made no meaningful net change since June of 2024, nearly eight months ago.
NVIDIA Corporation
Yet, NVDA is still the strongest stock within the PHLX Semiconductor Index (SOX) over the last 12 months, returning +60.66% through 2/25/25.
While stocks like INTC, AMD, SWKS, ON, and QRVO are all down more than -30% in the rolling 12-month period, NVDA is higher by +60.66%.
Thus, it’s right to say that SOX, similar to NVDA, has been range-bound over the past year. Yet, NVDA remains one of the better stocks within SOX, along with AVGO and TSM.
While it’s often emotionally rewarding to make the correct call on a stock before earnings, it’s notoriously difficult when a stock has been trading range-bound for the last eight months.
However, I like being bullish given NVDA’s strength within its own sector in the last 12 months combined with the bullish trend of the cycle (shown later in this report).
Key levels for NVDA lie at $140 on the upside and $112 on the downside. I anticipate that NVDA likely should begin to rise to challenge and exceed $140 which should lift the stock to its first meaningful technical target near $161. Intermediate-term targets lie at $180.
While I don’t anticipate that $112 should be broken in the near future, this is an important area to monitor and does represent a significant technical support level that can’t afford to be breached.
Given NVDA’s percentage within SPX, these $112 and $140 levels are the most meaningful for NVDA in the days and weeks to come. A move back above $140 should be quite positive for Technology, and eclipsing this is what Technology-focused investors will want to see to have confidence about the rise into March.
NVDA cycle composite shows a rally into late March as part of an intermediate-term push higher into early October
My daily cycle composite for NVDA looks quite positive here and should be in the process of rallying back higher into October with a brief pullback in April.
Its pullback from November into February looks to have occurred according to this model, and if this holds true for the months to come, then NVDA is likely to push higher into March as part of a larger rally that looks to have gotten underway back on February 3, 2025.
This composite was assembled based on the two most accurate cycles for NVDA going back since 2016. The pink line shown for this composite is based on amplitude, not magnitude. Thus, the extent of the swings is not as important as the turning points.
NVDA Cycle Composite
