Near-term trends are bullish for SPX, and I anticipate a sharp rally to finish the month of October after an interesting period of sector rotation in recent weeks. Monday’s success in climbing over last week’s highs for SPX and QQQ should enable these to both push back to new all-time high territory. Despite some minor warnings regarding breadth, high yield spread widening, and/or lack of broad-based participation, it looks like breakouts in AAPL and GOOGL should help Technology show sufficient leadership to carry US stock indices over the next few weeks. At present, many of the momentum trades of recent months have begun to slowly unwind in recent weeks. While this doesn’t portend a rally continuing in any of these, the structure of this “risk-on” trade has begun to noticeably change in the short run. I expect this might bring about volatility next month, but for now, trends remain intact.
The key point for most trend followers to pay close attention to revolves around the lack of trend damage for ^SPX and QQQ -0.25% in an environment where investors have grown more bearish in recent weeks. The pullback in many parabolic moves of the last couple of months seems to have shaken the spirit of many trend-following investors, despite a lack of any trend damage.
My comments today post close echo the sentiment of recent days in that today’s minor pullback likely constitutes a buying opportunity. While trends have certainly grown choppier in recent weeks, that hasn’t translated into meaningful technical weakness. Overall, I don’t see Equities turning down ahead of this month’s FOMC and feel like Chair Powell’s comments could serve as a bullish catalyst for a push up into mid-November back to 6850-6950.
If this area is reached in early to mid-November, then it would be right to expect some consolidation into late November, which would align with the cycle composites I posted last month. (For those who haven’t seen those cycle charts, the cyclical trend seems to be lower from now into late November.) However, given the “right translation” tendencies of most cycles, the majority of the rally could occur during 70-80% of this window ahead of a pullback during the final 20-30% into late November.
To reiterate yesterday’s comments, I do not expect that 6550 will be violated on any near-term weakness, regardless of when it occurs in 2025, and until larger trends begin to show weakness, it’s right to simply lean on existing trends in thinking Technology likely can carry US Stock indices higher, regardless of whether other sectors are showing much participation. However, in this case, there has been some good price action in many Consumer Discretionary and Healthcare names lately, which looks helpful. A rally in Financials would be more helpful to Equity indices and does not seem that far off.
S&P 500 Index
Treasury yields might possibly bottom and turn up into/after this week’s CPI report
The Treasury rally looks to be on “borrowed time” for now, and I anticipate a coming bounce in yields, which might get underway in the next couple of days.
Reasons for expecting this Treasury rally to reverse (Yields to go higher) is based on the following reasons:
- Yields are growing very close (or at) meaningful support (based on 2yr., 5-yr, and 10-yr yields).
- The Elliott-wave structure indicates that yields are in the final stages of this initial pullback since the spring of this year.
- Cycles have shown a possible Fall bottom in yields on daily cycle composites, and I believe that begins in the near future.
- DeMark indicators have signaled exhaustion for yields as well as Treasuries in price terms from a reciprocal basis (Sell for price, buy for yield). This might result in a bounce getting underway this week.
- From a non-technical perspective, the two possible FOMC cuts look to be firmly priced into the market at this point. Furthermore, a monthly CPI reading of 0.3% and a 3.1% Y/Y reading would still be above the FOMC’s target.
- The possibility of economic data being less accurate due to the government shutdown. Thus, a big drop in yields in recent months, which is nearing support, might result in some upward volatility for yields if/when results come in different from expectations.
I don’t sense that the correlation between Treasuries and Equities will continue to be positive. Thus, a bounce in yields could happen, which actually results in Equities pushing higher into November.
US Government Bonds 10 YR Yield
Lodging/Leisure group within Consumer Discretionary has begun to strengthen
This Investors’ Business Daily chart below highlights the breakout in this Leisure/Lodging industry group, which is dominated by the Hotels. Stocks like MAR 0.49% and HLT -0.34% showed very strong rallies on Wednesday, and look likely to continue higher in the weeks to come.
I had discussed the Consumer Discretionary sector starting to bounce a couple of weeks ago, and this group within “Discretionary” seems quite positive in the short run.
Key Hotel stocks within this group are: MAR 0.49% , HLT -0.34% , IHG -0.35% , H -0.10% , HTHT 1.32% , and WH -0.38% . Of these, MAR 0.49% and HLT -0.34% look to be the strongest and also tend to dominate by market capitalization. Yet, some of the other booking agency stocks very well might show some upward follow-through as a result of Wednesday’s move.
Overall, I am technically overweight the Consumer Discretionary sector for Q4, so I expect a strong rebound in this area in the weeks to come.
Leisure-Lodging
TSLA is likely to push higher into year-end, and near-term weakness would represent an attractive risk/reward opportunity
(Wednesday’s post-market results from TSLA failed to show much in the way of gains or losses in the stock ($433.78 heading into the conference call vs. a closing price on 10/22 of $438.97).
I’ll discuss my thoughts, which I shared on Flash Insights heading into this conference call, and what I expect in the months ahead.)
TSLA -1.17% hasn’t shown us much progress in the last month following its sharp rally into Oct 10, which proved to be near an exact six-month (180*) rally from the April lows. While the near-term pattern is choppy, one should position long if looking towards year-end, as both technical structure, momentum, and cycles have improved since April.
It’s extraordinarily difficult to have a timely short-term call on earnings given this choppy pattern, but I feel like a push up to 488 is likely before some consolidation into mid-November.
Thereafter, a move to new all-time highs happens, which results in an acceleration that could carry TSLA north of $600. Thus, I remain quite bullish on TSLA -1.17% technically despite the near-term range-bound activity, and would use weakness over the next couple of days (if this occurs) as a chance to buy dips.
$411 is important support, and a break of that would warrant patience as TSLA might reach 370-380 briefly before turning up sharply. (This does not need to happen technically, but this is merely a range of importance in the event that Thursday’s early price action is weak, for whatever reason.)
However, a move back above $450 on a gap likely helps to reach all-time highs from last December at $488.54. Given the choppiness of the last month, it’s important to pay more attention to intermediate-term structure than what has happened in recent weeks, which has proven more range-bound. However, it’s important to note that any rise back to new all-time highs should result in upward acceleration technically. Thus, it looks wrong to sell on a move above $488.54 as a weekly close above this level likely could result in acceleration into year-end.
For those who care about timing, I detail below how one could have used TSLA -1.17% ’s low-to-high swing in calendar days for purposes of determining possible turning points in the stock this year. While many are well-versed in price-based Fibonacci percentage calculations in ranges, I find it even more valuable to utilize Fibonacci based on time.
Thus, when seeing a 34-week (239 calendar day rally) in TSLA -1.17% from April into December of last year, one can calculate Fibonacci-based time percentages of this former swing and extrapolate forward to attempt to pinpoint turning points.
Doing this just using this one swing, one sees that the 38.2%, 50%, 61.8% and 100% range of former low to high swing helped to line up very close to the actual turning points in the stock. For the future, my own time-based studies suggest that the middle part of November is also important based on different historical swings in the stock market. Thus, any possible mid-November weakness in my view should represent a very attractive risk/reward for owning TSLA -1.17% into year-end. (This also lines up with my daily cycle composite on TSLA -1.17% , which points higher into January 2026.)
Tesla, Inc.
