Short-term trends in US Equities remain bullish, and following this week’s breakout now lie within striking distance of all-time highs. While a rally over February peaks should happen this Summer, it’s hard to make a technical call for an immediate breakout given the minor slowing in momentum coupled with weak seasonality trends for June. Meanwhile, the US Dollar has begun to move sharply lower, and Treasury yields look to be joining DXY following this week’s breakdown in yields across the curve. Additionally, precious metals, Emerging markets and commodities are all an area of near-term focus and can likely work well in the weeks/months ahead given a falling US Dollar. Overall, a push up to between 6000-6150 is likely for SPX, while QQQ should rally to 540 before some minor stalling out.
My short-term thesis still calls for a push up above SPX-6000 which can get close to, but not eclipse February peaks. Treasury yields and US Dollar weakness today seems to be ongoing and should serve as a positive for US risk assets.
While all-time highs eventually should be surpassed, my feeling is that the combination of DeMark indicators, poor June seasonality, and some minor negative breadth and momentum divergence likely result in a slowing of this rally within a week.
Following some likely minor backing and filling between June 9th and June 18th, I suspect that a push back to new highs can get underway, which ultimately should lead to SPX reaching 6650 into this Fall.
For today’s initial chart, instead of highlighting SPX, it’s proper to turn our attention to ^TNX instead given the more meaningful technical move.
As shown below, the weaker-than-expected ADP number on Wednesday resulted in a sharp drop in the US 10-Year Treasury Index yield to the lowest levels since early May.
While this Friday’s Non-Farm Payroll number should also be important to pay attention to with regards to Yields, I expect that Wednesday’s breakdown kicks off a larger Treasury rally, resulting in TNX initially pulling back to test 4.25%. While it’s difficult to call for a move to new 2025 lows just yet for TNX, I suspect this should eventually be likely.
US Government Bonds 10 YR Yield
Solar Energy might be finally turning the corner
As shown below, the Solar Energy ETF (TAN) has finally begun to show some upside progress. Its recent breakout above its one-year downtrend is constructive for price action in the short run as well as for momentum to gradually improve.
However, as can be seen below, the larger area which guides the intermediate-term uptrend intersects in the high $40’s and recapturing that will certainly take time.
Near-term, the successful breakout of the one-year downtrend has caused a strengthening in weekly momentum.
Overall, I suspect that a move up to the low $ 40s is getting underway. Thereafter, the Solar Invesco ETF (TAN) will likely encounter some strong resistance.
Solar Invesco ETF – TAN
Solar Energy ETF (TAN) has broken out vs. Equal-weighted Energy (RYE)
Interestingly enough, the ratio of TAN to RSPG has shown quite an improvement in recent weeks.
While it’s difficult to have a high degree of conviction about TAN following its lengthy underperformance, a few technical developments have happened that make this worth paying attention to.
Specifically, ratio charts of TAN to RSPG broke out above a 1-year + downtrend from late 2023. Weekly momentum indicators like MACD have also crossed the signal line on this relative pair, and MACD has turned up sharply.
Overall, I expect a gradual recovery in Solar Energy after a difficult few years. For those contemplating Energy, clean Energy looks like a preference in the months ahead until the entire sector might finally begin to bottom out.
Key stocks which are part of the Clean Energy group that have appeal are: GEV, VST, CEG, AMRC, NXT, and FSLR.
TAN/RSPG
