Near-term Equity index trends remain bullish despite Wednesday’s pullback and will likely push higher into the end of the month and quarter. Despite some investors expressing skepticism about this rally being just a “Dead-Cat Bounce,” there are ample technical signs that this move should be underway despite the recent sluggishness. Both Treasuries and the US Dollar have slowed their rate of descent, but intermediate-term trends in both remain bearish. Following some whip-saw-like trading into next Wednesday (4/2), I expect Equities to start to turn higher more quickly.
Wednesday’s weakness failed to derail the ongoing bullish bounce from 3/13. While prices in SPY and QQQ fell to nearly fill the gap from last week, there wasn’t meaningful technical damage to say this bounce had run its course.
As discussed in recent days, the combination of bearish sentiment with bullish breadth initially in mid-March was helpful towards forming a meaningful low. While many remain skeptical ahead of 4/2, it looks right to stay bullish with the likely Pension rebalance into end of month and quarter which might total $40 billion or more.
Furthermore, as detailed in recent reports, many “Magnificent 7” stocks lie right near key intermediate-term trendlines, which appears to be a solid area of support (See chart further in this report for MAGS technical).
As seen below, S&P’s higher gap has merely been retraced to attempt to fill the gap from late last week. However, there hasn’t been any damage to this more recent short-term uptrend. Furthermore, the Elliott-wave structure does not appear to overlap and is choppy, which might suggest the potential for a pullback to new lows. Finally, many investors continue to mention Tariffs as being problematic and seem determined to wait until after 4/2 for more clarity. As most of us are aware, the market rarely gives investors an optimal time to enter based on sudden good news at the lows. I expect that a pushback higher towards 5827-32 should happen by the end of the week/early next, which might catch many off guard. Thereafter, even if minor consolidation takes place, it shouldn’t undercut 5700 before beginning a rally up to 5900.
S&P 500 Index
Magnificent 7 stocks are likely to find support and turn higher into April
As might be expected, hourly charts of Roundhill’s MAGS ETF looks similar to the hourly charts of QQQ which have pulled back to an area of attractive technical support.
While some investors remain concerned about the weekly negative momentum in stocks like NVDA AAPL TSLA MSFT AMZN NFLX META, and others, the weekly chart patterns remain in good shape.
Furthermore, this minor “backing and filling” for MAGS should hold near this area of hourly oversold territory at the trendline shown below. I consider MAGS to be an excellent risk/reward at current levels for those who missed the initial surge off the lows in mid-March.
Roundhill Magnificent Seven ETF
Software still pushing higher vs. Semiconductors
For those who remain skittish on owning the Semiconductor sector given quite a few stocks having shown abnormally large technical deterioration, it might pay to revisit the Software stocks as a way to play Technology.
I had discussed this a couple of months ago as this breakout in Software vs. Semiconductors was getting underway. Technically speaking, Software still looks attractive vs. Semis” as shown by relative charts of IGV vs. SOXX.
While charts of NVDA, TSM, and AVGO remain attractive within the Semiconductor space, Software as a group still looks more attractive, technically speaking.
IGV/SOXX
