Near-term and intermediate-term technical trends remain bullish for US Equities, but Tuesday’s setback might have kicked off the start of a minor pullback in Stock indices, lining up with a traditional “Sell Rosh Hashanah, Buy Yom Kippur” theme, which has now resulted in three straight days of selling pressure. While the SPX and QQQ have not yet shown proper evidence of having bottomed out into Thursday’s close, the risk/reward looks quite appealing for US Equities to begin to stabilize and rally back to new highs. With regards to Equities, I do suspect downside should prove limited, and am expecting the start of a rally which might begin either Friday or early next week. Precious Metals, Cryptocurrencies, and Treasuries also look appealing at current levels and all should rally into mid-October, technically speaking.
There’s insufficient proof at this point that the three-day decline is complete, and DeMark signals are not yet at hand on 60, 240-minute, or daily charts to add confidence about a low. Furthermore, the minor downtrend from peaks earlier this week remains in place and will need to be surpassed to have more conviction of an imminent rally.
However, the wave structure does show some evidence that it might be complete after this three-day pullback, and the larger uptrend for ^SPX and QQQ -0.17% remains very much intact and has not been violated on this setback.
Overall, the risk/reward has gotten much better, and I’m unwilling to think technically that a larger breakdown should occur in September, which would sever the uptrend over the last few weeks. Thus, this dip makes the US Stock market attractive, and I suspect that ^SPX has limited downside before bottoming and rallying back to near 6800 into mid-October.
As shown below, the ability to exceed this downtrend would be helpful towards thinking a push back to highs can get underway, and for now, it has not yet happened. I’ll address this in Flash Insights or in a daily note if/when it occurs.
S&P 500 Index
Healthcare weakening is troubling for this sector in the near term
Thursday’s worst-performing sector was Healthcare, and this remains a difficult sector to have a lot of conviction in, in the short run.
When looking technically at the Equal-weighted Healthcare ETF (RSPH 0.53% ) we see a lackadaisical bounce off the April lows which has now begun to roll over again.
Stocks like CAH 2.87% , BAX 0.11% , REGN 1.65% , GEHC -0.93% all look to be laggards and could likely go lower in the next few months technically, making these unappealing at this time.
I had suspected Healthcare might perform in line with the market during this period of volatility in September/October, but the performance this week does not make that seem correct. I’ll monitor but for this week Thursday’s decline proved to be a bearish development for this sector, and is now approaching August lows in relative terms to the Equal-weighted S&P relatively and also nearing the lows of its range.
Breaks of 27.75 would make Healthcare a likely Underweight technically and might result in RSPH pulling back to test undercut April lows.
Invesco S&P 500 Equal Weight Health Care ETF
Biotechnology remains preferred within Healthcare
For those forced to put money to work in Healthcare, it’s important to show that Biotechnology’s recent comeback makes this one of the more attractive sub-sectors within the Healthcare sector.
Weekly relative charts of the Ishares Biotechnology ETF vs. the Sector SPDR Healthcare ETF (XLV 0.04% ) have reached the highest levels of the last few years in September.
That’s good news for “Biotech” despite the Healthcare sector being under tremendous technical pressure.
Thus, Biotechnology is preferred on a relative basis within Healthcare. However,, it remains important to be quite selective when selecting stocks within this sector.
IBB/XLV
Silver likely to push up into October, but quarterly logarithmic charts show the reason for intermediate-term appeal
Silver rose another 2.5% today and continues to outpace Gold. I’ve shown lots of parabolic daily charts of Silver and relative charts lately, but it’s always important to put these into proper perspective.
In this case, with four more trading days left in the quarter, Silver (shown as the Spot Silver contract) is set to make a new all-time high Quarterly close, exceeding levels seen back in 2011 and 1980.
So while the near-term charts certainly are overbought, and some cycles suggest that Silver might face some consolidation following a runup into mid-October, I assume that this simply means it might stall out near the prior highs on an intra-quarter basis. However, on a long-term view, this is technically very bullish for Silver, and the ability to close up over $50 on a quarterly close would represent the start of a much larger long-term rally. The chart shown here is a Quarterly Silver chart from Bloomberg, shown on a logarithmic basis, going back since the early 1970s, but patterns of this sort are very real and continue to work time and time again once they’re resolved.
XAG
