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, likely helps to keep Equity indices up until mid-month before some stalling out gets underway. Near-term, both WTI Crude oil and USD/JPY might show minor bounces in the next 1-2 weeks as part of intermediate-term bearish patterns that ultimately take both off these lows. At present, Cryptocurrencies and Treasuries look appealing at current levels, while Precious metals are nearing resistance, and the risk/reward for new investments does not look as appealing.
I still view trends as having a good likelihood of pushing higher this week, but expect that ^SPX should find resistance near 6790 while QQQ 2.65% could face resistance near 614 over the next week, which could have some importance.
Monday’s AMD 5.53% news certainly took the spotlight, helping both ^SPX and QQQ 2.65% push higher while the broader market was fractionally weaker on Monday.
7 of the major Sectors out of 11 fell in trading on Monday, and more NYSE volume flowed into Declining vs Advancing issues. Yet, the bullish trend pushed ever higher (with regards to pure ^SPX and QQQ 2.65% price action), and it remains difficult to be negative on US Equities without evidence of trend deterioration or a major catalyst.
As shown below, the trend over the last five months has given investors little to no reason to show much concern, and Technology’s comeback in recent months following a difficult July is thought to be encouraging.
The key near-term technical risks involve the following (which aren’t completely in place just yet)
- Overbought conditions– This is notoriously a poor reason to avoid owning US Equities, as many investors realize that overbought conditions can likely persist and don’t have to specifically represent a reason for concern. Yet when weekly RSI 0.11% rises over 70, it’s important to pay attention and not become overly complacent.
- Weekly DeMark indicators for both QQQ 2.65% and SPY 1.51% might materialize within a week and have already begun to form on a few indices. At present, this isn’t complete per my own standards, and still looks premature.
- Cycles start to turn lower in the back half of October. Whether or not this materializes, it’s important to note that the cycle composite does show a short-term negative bias into mid-November. Thus, if there’s going to be any weakness in this trend, I highly anticipate that it should happen starting within 1-2 weeks and lasting into early to mid-November before a strong year-end rally.
- Breadth hasn’t been as strong as it was seen in late Spring into July. While the short-term breadth gauges have risen over the last week, in general, they’ve dropped off when looking at the Percentage of SPX or Russell 3000 names above their 20-day moving average.
- One particular gauge of sentiment, which I utilize, the Equity Put/call ratio, remains a bit too low for comfort after having pulled back to 0.45 in the last two weeks. While the broader gauges I track remain Neutral at best, this particular reading remains a bit too low for my liking. (Signifying ongoing heavier call buying than Put buying.)
Overall, the biggest positives revolve around the ongoing bullish uptrend, having shown little to no evidence of any deterioration this past few months. Furthermore, Technology’s comeback has been something to marvel at. Given that Tech represents 30% of ^SPX, this remains a big positive for US Equities.
Until mid-September lows of 6569.22 are broken (Sept 22 intra-day lows), it makes it difficult to have too much concern about ^SPX’s near-term technical direction being anything but bullish.
As I stated late last week, there are several upside projections between 6780-6795 that could have some importance later this week. However, I don’t see early week as being a problem for US Equities, and SPX has not reached the top of its trend channel.
S&P 500 Index
AMD’s OpenAI deal results in sharp gains to new all-time highs
AMD’s 7% share of the SOXX 4.38% (Ishares Semiconductor ETF) caused a nearly 3% gain in SOX on Monday (Philadelphia Semiconductor index), and as might have been expected, its 23.71%+ gains proved to be the best performing part of both SOX and also QQQ 2.65% .
As shown below, this area near March 2024 peaks proved to be very strong near-term resistance, and AMD 5.53% peaked out within $1 of former highs before weakening throughout the session (following it having opened near the highs of the day at $226.45 and closing at $203.71).
Normally, giant reversals that happen near prior all-time highs can have short-term significance, and in this case, the 2024 peaks represented very strong resistance.
Given the abnormally high volume, any weakness under $200 would likely signify an attractive technical opportunity for those who do not own this stock.
I expect this to likely face additional consolidation in the weeks to come, but I find AMD appealing to buy between $187-$195 on any weakness into November. Thereafter, I expect this to rise to likely $250.
Advanced Micro Devices
SMH still shows little evidence of upside exhaustion, despite overbought conditions
Many investors might have felt like AMD 5.53% ’s reversal on an intra-day basis might translate into SMH 3.98% itself (Vaneck Semiconductor ETF) starting to stall out.
Yet despite near-term overbought conditions, there isn’t evidence of any DeMark-type confluence of weekly “Sells” (TD-13 Countdown) signals like what happened back in Summer 2024.
As this chart shows, last year there were three separate exhaustion signals that all cropped up within a month’s time.
At present, while one TD Combo signal did materialize in early September, this was never confirmed, and TD Sequential exhaustion remains about three weeks away (TD Sell Setup count is also 3-4 weeks from completion).
Overall, Semiconductors likely still strengthen a bit more in October, and SMH might rally up to $370-$380 before some exhaustion indicators begin to materialize in late October.
Vaneck Semiconductor ETF – SMH
Yen could weaken in the very short-term before rallying back to new highs for 2025
In the short run, the Japanese LDP leadership race, having produced a decisive victory by Sanae Takaichi, was seen as temporarily negative for the Japanese Yen.
Takaichi advocates a “responsibly aggressive” fiscal stance, but does not necessarily signal a return to a weaker Yen right away. As Bloomberg noted today, her focus on “net debt” (a far lower measure than the gross measure cited within the Government’s Debt to GDP ratio) might be seen as more flexible.
The larger technical trend for USD/JPY remains negative and should still result in Dollar/Yen pulling back to new 2025 lows over the next few months of 2025.
However, this week’s rally is a minor technical positive for USDJPY and likely will prohibit an immediate decline in USDJPY.
Thus, overall, I see the possibility of a move up to 152.50-153 before the start of a move back under September 17th intra-day lows of 145.493 in USDJPY.
Such a move would eventually be quite bearish for USDJPY in the short run, likely driving this down to the low 140’s or high 130’s before a reversal back higher.
Overall, Monday’s move looked to be a temporary negative for Japanese Yen (temporary positive for USDJPY), but it doesn’t suggest the larger trend has changed.
U.S. Dollar / Japanese Yen
