Near-term and intermediate-term technical trends remain bullish for US Equities, and the success of Equal-weighted SPX, having joined SPX and QQQ back at new highs this week, should keep this rally going a bit longer. The DJ Transportation Average made an important short-term breakout, though it’s likely this does not immediately rise over $16,500. Despite many thinking Technology might be peaking, my technicals still show this sector to rally back over the next 1-2 weeks and likely outperform the Equal-weighted SPX. Finally, cryptocurrencies and Treasuries look appealing at current levels, while Precious metals are nearing resistance levels into next week.
I’m encouraged by the recent broad-based push higher in Equal-weighted SPX this week, along with the evidence of Transportation stocks and Small-caps showing late-week strength.
While ^SPX won’t be as good of a risk/reward if/when price nears the 6800 level (QQQ 0.89% near 614), that’s still a bit higher, and DeMark indicators likely won’t produce weekly exhaustion signals for another 1-2 weeks.
As discussed in today’s Flash Insights, the combination of early October bullish seasonality in Post-election years, coupled with the lack of weekly DeMark exhaustion, along with near-term bullish Elliott-wave counts, all make the case for a further push higher into mid-month.
The risks at this point involve Technology possibly slowing in its ascent, as the rally has gotten quite extended in recent weeks. As many might be aware, stocks like META -1.80% , NFLX -3.20% , AMZN 0.18% have not been rising over the last month, but have been falling.
Yet, the rotation within the Magnificent 7 has been encouraging, and TSLA 0.94% having strengthened over the last month has helped to keep MAGS 0.91% afloat despite some weakness in other names. As I’ll show in this report, it doesn’t seem like Technology has peaked, despite Friday’s weakness in QQQ 0.89% . I expect next week to bring about a push back higher to new highs over the next 1-2 weeks.
Other technical risks to note are the overbought conditions on the daily and weekly Relative Strength index of SPX and QQQ, while DeMark’s TD Sequential and TD Combo might line up for both SPY and QQQ for the first time in months as of mid-October.
As I discussed a few months ago, October has some cyclical importance given that this period lies 180 calendar days from the April 2025 low, and there is some weakness in seasonality that’s possible given the cycle composite for SPX possibly turning down into November.
At present, as we’re all aware, trends matter more than cycles, sentiment, DeMark indicators, or breadth erosion. While it’s always important to understand the possible risks and timeframe of a possible rally starting to fade, it ultimately depends on SPX turning lower to break its uptrend, which would be the most important factor of all. Until/unless this happens, I believe it’s right to be long, expecting a continued rally next week.
As shown below, the pattern of this SPX move from 9/25 swing lows looks to be carving out an Elliott-style five-wave advance. I expect that we are in the final push higher of this move from late September, but I am still anticipating a push up to the 6780-6800 area before much stalling out.
S&P 500 Index
Equal-weighted S&P 500 ETF, pushing to new highs this week, is certainly a short-term positive for US Equities
While ^SPX is growing stretched with daily and weekly RSI back over 70, the Equal-weighted ^SPX has made a very convincing breakout this week as sectors like Healthcare and Transportation within Industrials have roared back to life. I suspect that while Technology might be set to take a breather in late October, there is some convincing evidence of the market having begun a healthier advance, given the strength back to highs in RSP -0.06% , the Invesco Equal-weighted ^SPX. Intermediate-term targets on RSP on a price and time basis line up in 3-4 months near $209 compared to its current $191.25.
Invesco S&P 500 Equal Weight
Equal-weighted Technology still looks to push higher over the next 1-2 weeks before this stalls out into mid-to-late October
Many investors might have been fearful that Friday’s weakness in the NASDAQ 100 index might possibly reflect some kind of peak for Technology.
Fortunately for the Market bulls, this does not seem to be the case.
DeMark counts on both QQQ on weekly charts, along with weekly counts of Equal-weighted Technology vs. Equal-weighted SPX still point higher over the next couple of weeks, and I see today’s weakness as something which makes QQQ 0.89% appealing for a coming push up to $614.
As mentioned earlier in this report, MAGS 0.91% , the Roundhill Magnificent 7 ETF, also shows excellent technical structure, and recent consolidation in stocks like META -1.80% , NFLX -3.20% , and AMZN 0.18% has not produced any kind of peak for MAGS.
Stocks like TSLA 0.94% have strengthened in recent weeks (despite Thursday and Friday weakness) while NVDA 3.04% and AAPL 1.03% also remain quite strong. Thus, a peak in Technology looks premature at this point.
RSPT/RSP
DJ Transportation Average breaking out looks positive in the short run, but likely does not exceed $16,500 right away
As shown below, we’ve finally seen a breakout in TRAN (DJ Transportation Average) from the triangle pattern that has kept this range-bound for the last couple of months.
This can likely help to jump-start its performance at a time when the market is sorely seeking leadership from areas outside of Technology. Stocks like JBHT -0.55% LUV 0.36% ODFL -1.69% R 0.31% and CHRW -0.32% all rose more than 2% today.
It’s typically important to see the Transports confirm the bullish movement in the broader averages like ^SPX and DJIA 0.09% from a Dow Theory standpoint, and while this will take some time, today’s constructive gains should lead this higher over the next few weeks.
My favorite stocks within the Transports sector are names like CHRW -0.32% , UNP 0.46% , R 0.31% , and CSX 0.31% .
However, I am not convinced that TRAN is ready to move back to new highs, given the extreme weakness in stocks like UPS 0.04% , MATX -0.55% , LSTR -1.22% , JBHT -0.55% , along with most of the Airlines. JETS -0.29% , the Global Jets ETF, broke a multi-month uptrend back in late September, and will require some evidence of technical strength before it’s right to favor the Airlines.
Overall, I like this breakout in TRAN, but expect the strength at this time to prove short-lived. Bottom line, it’s not unreasonable to see a push up to $16,300-$16,500, but I am not expecting an immediate breakout of July highs.
Dow Jones Transportation Average Index
Quantum stocks are “All the rage” and still look to strengthen over the next few weeks
One of the hottest areas in the market right now isn’t the Magnificent 7, but rather Quantum stocks.
QTUM 1.05% , the DeFiance Quantum ETF, is an ETF that holds 76 different companies affiliated with the Quantum space.
Technically, this still looks attractive in the short run, despite having grown overbought.
I expect QTUM to likely rally to $120 before facing some resistance and stalling out into mid-to-late October.
For now, this looks early to peak, despite the rally in stocks like ARQQ 4.01% , RGTI -0.04% , QUBT -5.15% , and IONQ -1.57% . I find this QTUM ETF attractive on a very short-term basis only and for those involved, would utilize a 9-day rising moving average (m.a.) for purposes of risk management. (Exiting long positions on any daily close under the 9-day m.a.)
Defiance Quantum ETF – QTUM
