Near-term and intermediate-term technical trends remain bullish for US Equities, but it’s thought that the rally in US Stocks likely will face some meaningful resistance at marginally higher levels, which might begin sometime next week, before August 20th. SPX has now officially joined QQQ at new all-time highs and might scale up to 6550 before making some kind of peak near resistance. Equal-weighted SPX and DJIA have not yet hit new all-time highs, but look poised to challenge these levels into next week. Overall, despite some of the minor concerns regarding Elliott-wave patterns nearing completion, seasonal/cyclical periods of weakness approaching and waning breadth, it’s going to be necessary to see evidence of US Equity index prices turning down in a manner that would help to add conviction to these concerns. Overall, while it’s proper not to grow too complacent in August, it’s also proper to let this rally run its course until the market demonstrates evidence of starting to weaken. For now, it still appears that the path of least resistance remains higher.
Despite some minor rotation out of Momentum stocks on Wednesday and into Small-caps, along with some evidence of “Non-profitable Technology” (Low-Quality) names gaining ground, there’s no real evidence of markets peaking. Overall, the rally remains intact and likely pushes above 6500 in the days ahead.
This daily chart showed some minor stalling into mid-day Wednesday before rallying to close out the session with mild gains in ^SPX and fractional losses in QQQ 0.88% . However, Small-caps are continuing to gain ground and have shown a noticeable uptick in momentum following the SOFR market pricing in a near-certain 25 bp. rate cut in the Funds rate at the September meeting.
Hedging bets on a possible 50 bp. cut also began to be seen in markets, and this combination of accelerated FOMC rate cut possibilities along with today’s news on accelerated money growth in China seems to be lending support towards risk assets.
Technically speaking, I expect a coming push above SPX-6500, which might lead to 6550, and expect that both DJIA 1.49% and Equal-weighted S&P 500 ETF (RSP 1.97% ) should make an attempt to break back out to new all-time high territory.
Daily ^SPX chart showing this current upward projection is below. It would take a move back under the most recent uptrend from late July to cast some doubt on the prospects of a push above 6500, and this looks premature as of Wednesday’s close.
S&P 500 Index
Small-caps are gaining further ground, and IWM 2.98% likely can push to 185 without much trouble before any stalling out
Small-caps continue to work well this week following the 2nd largest gain of the year on Tuesday. Closing near its highs yesterday above July peaks allowed this to accelerate further today and IWM 2.98% is far outpacing the broader market and SPX itself, as its +1.32% gains are swamping the SPX which is showing a scant +0.03% gain today.
Counter-trend signals suggest another 2-3 days of gains look possible, and I expect this could carry IWM up to 235, with a maximum near-term level of $239 before this begins to consolidate this move.
Note, for those that missed yesterday’s notes, I discussed relative monthly charts of IWM 2.98% having confirmed “13 Countdown” signals vs. the Equal-weighted SPX ETF RSP 1.97% in a way that could allow this to outperform into year-end.
Russell 2000 Ishares ETF – IWM
China’s Equity market starts to show attractive relative strength following its Money Growth data
China’s Equity market is looking increasingly more appealing following the iShares China Large-Cap ETF (FXI 0.36% ) rallying sharply to test the peaks from late July. It’s important to note that with two days left in the week, any end-of-week close above $38.65 would signify the highest weekly close since 2022.
Today’s sharp rally followed the M1 Growth data showing an upside surprise of +5.6%, vs estimate of +5.2%, and +4.6% in June. While its arguable if China’s domestic Economic data matters if US is actively trying to reduce trade imbalances, (and China’s 3% exports are more than half what they were to US two decades ago,) this does seem like a short-term positive for liquidity and China’s stock market is responding positively today.
I expect that Wednesday’s surge helps to kick off a push to $41.75, and time-wise, this move likely can persist into early September before stalling out and trend reversal.
My favorite Chinese Equities right now are: TCEHY, TME 2.43% , BABA 0.14% , GCT 10.32% , ZEPP 10.70% , SOHU -2.50% , and some Small-cap names like RERE 0.74% , VIOT 4.22% and NIU 3.45% .
These all look attractive to own over the next month for further upside progress, technically speaking.
iShares China Large-Cap ETF
Alibaba is being added again to the UPTICKS list following recent stabilization ahead of earnings
Technically I view the recent strength in BABA 0.14% in recent weeks as being a constructive development which makes this attractive following its big setback into early June.
The minor consolidation in BABA morphed into a triangle pattern that has just been resolved by structural improvement, representing an upside breakout to this recent pattern.
Volume gave an early hint to a possible breakout following the highest volume session on July 15th since mid-April (34 million shares), coinciding with a sharp upward gap. Its subsequent consolidation in mid-to-late July has now been resolved higher once again following today’s rally to the highest levels since mid-May.
This is quite bullish for BABA 0.14% , and should help to drive this back to challenge and eventually exceed the prior peak from mid-March at $148.43.
Overall, this positive technical price action in recent days directly coincided with the bullish economic news announced on China’s M1 in the last 24 hours.
Bottom line, given a good technical likelihood of a further decline in the US Dollar in the weeks to come, I like adding BABA 0.14% back to UPTICKS at its Wednesday close of $126.86.
My technical upside targets lie near March highs at $148.43, followed by $158, then $188.
Alibaba Group ADR
