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 resistance at marginally higher levels, which might limit the rally to 6500-6600 before some consolidation gets underway. 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. Both the US Dollar and US Treasury yields seem to be headed lower in the weeks to come, and this is thought to be helpful for US risk assets. 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. If/when SPX gets under early August lows at 6212.21, it will be proper to discuss a pullback getting underway. At present, with NVDA earnings on deck, and this stock having formed a bullish triangle pattern, it’s difficult to be too negative just yet on the broader market.
Tuesday proved to be one of those days where the negative action in Technology helped to camouflage the bullish price activity in the broader market.
Interestingly enough, despite a -1.72% decline in XLK 0.39% , the Equal-weighted SPX rose over +0.30% today. Nine out of 11 sectors finished in positive territory, and both REITS and Utilities were higher by more than 1%. Market breadth finished positive, and more volume flowed into advancing issues than declining.
Yet, the focus of most market participants remains clearly on large-cap Technology, and declines in NVDA -1.20% , SMCI -10.34% , AMD 2.18% , ORCL -0.07% and PLTR -1.44% all resulted in Technology falling hard despite gains in many other sectors.
It should be pointed out that the Defensive positioning is continuing to grow, and Consumer Staples have now trounced Technology over the last month on an Equal-weighted basis.
Thus, my comments will be centered on QQQ 0.50% (shown below) along with discussing possible support targets on many of the large-cap Technology names ahead of Jackson Hole.
As discussed earlier in my Flash Insights commentary, I don’t suspect that the 8/13 peak marked a meaningful peak for indices, despite this having coincided right near the cyclical turning date of 8/13 which I discussed a few weeks ago. I don’t give this much credence for being anything more than a temporary top given the wave structure, along with the lack of meaningful technical deterioration of many large-cap Technology names.
However, I’ll certainly continue to monitor this in the weeks to come. At present, I expect to see QQQ likely bottom in the next 1-2 days at levels initially near 565-7 and below near $563. Technically, a break of this uptrend ahead of Jackson Hole’s meeting later this week looks improbable, and my thoughts are that it could prove to be a bullish catalyst for driving stock indices back to new highs.
However, it’s on the next push to new highs into September where I feel it’s super important to keep a close eye on market breadth and participation. For now, this pullback should be nearing support and begin to stabilize and turn back higher.
Invesco QQQ Trust, Series 1
NVDA shows a minor breakdown, but likely holds $170
NVDA -1.20% has broken down to the lowest levels since 8/4, and volume is slightly elevated. This does violate the minor triangle pattern, but it will likely find support either near 174.50 or under near early August lows at 170.89. That latter level is important to hold ahead of earnings.
The large high to low bearish bar thus far (opening near the highs and trading down near the lows of the session) is typically a minor negative, but given the relative lack of deterioration in this stock since the minor pullback in late July, it doesn’t create too much of a technical negative for the broader pattern, but merely a short-term negative.
My expectations are that a bottoming in NVDA ahead of earnings and also the broader market should happen, but as always, it pays to know how this thesis would be wrong. Under 170.89, while not expected, would result in weakness down to near 163 before this stabilizes.
My thinking is that a new range starts with lows occurring above Aug 1 lows and then trades back higher into earnings. On the upside, it’s important to get over $184 to help restore this prior trend, and upside could take this to $200 if this occurs. For now, a bit more weakness looks possible into tomorrow based on today’s trading.
NVIDIA Corporation
Small-caps also likely find support over the next 1-2 trading days
IWM 1.44% also fell under lows of the last few days and has reached the minor uptrend line from late July. While the area at 224.93 up to 226 should have importance (and IWM 1.44% has shown some minor stabilization in the last hour, one cannot rule out a possible further decline to $223.75-$224 area, which looks stronger.
This would cause the initial leg down from 8/13-8/14 to be equal to the more recent pullback, which started today, and these waves would be equal at levels just below $224.
Additionally, it is important structurally for IWM 1.44% to hold above $222.84, or the prior early August peaks made around 8/7. I don’t see this level being broken, so any further weakness would put this in a very attractive risk-reward zone for an advance back higher to $235-$240 into mid-September.
If this were to happen, then some possible resistance might then materialize, and IWM 1.44% might weaken into mid-October before bottoming and turning back up sharply to new all-time highs, with an initial target at $244-$245.
iShares Russell 2000 ETF
META charts show this is also nearing an attractive level
META 1.66% has pulled back to test its pivot area, where it broke back out to new highs back in late July. I expect $743-745 to prove to be good support for this technically in the short run, and expect one more leg down from its current $750.82 lower into tomorrow before this stabilizes and starts to turn back higher.
No trend damage has occurred, and volume today is noticeably less than yesterday, and well below breakout levels from late July. Thus, META 1.66% is approaching support this week, which I feel is important technically.
While not shown below, the hourly chart shows this wave structure to be possibly completing the final stage of its ABC-type corrective pattern, but still lacking the final leg down, which would help hourly DeMark indicators form exhaustion, which might result in stabilization and a coming reversal back to the highs. At present, this remains early for those who are short-term focused, but similar to my prior Flash Insight on META 1.66% from today, I do suspect this is getting close and might find support between $743-$745 before turning back higher.
Meta Platforms, Inc.
Software remains an area of near-term underperformance
I had discussed the bifurcation in Technology in recent weeks along with the start of underperformance in Software stocks.
The iShares Expanded Tech-Software ETF (IGV -0.22% ) broke down to the lowest levels since late June today, as negative performance from PLTR -1.44% , MSTR 2.67% , SOUN 3.77% , and ORCL -0.07% weighed heavily on Software.
I feel today’s decline likely can continue a bit longer given the large high to low range and support violation which happened today.
Technical support for IGV -0.22% could materialize near $104-$105 near the bottom of the daily Ichimoku cloud, but should prove to be an area where IGV -0.22% can stabilize.
At present, Tech Hardware and Semis remain more actionable than Software, and this likely continues a bit longer this week, given today’s IGV -0.22% breakdown.
For those who care about PLTR -1.44% , I expect that $151-$154 might provide technical support into Wednesday’s session, a bit lower than Tuesday’s $157.79 close.
iShares Expanded Tech Software Sector ETF
