Near-term trends are bullish for SPX, but the rally is growing closer to aforementioned targets, while many of this week’s important Central bank and earnings-related announcements have yet to be announced. I feel like SPX shouldn’t immediately get above 6950, which might translate into this week’s Tech earnings possibly not coming through as bullish as might be anticipated. While trends remain certainly quite positive, I feel like VIX at 16 is quite attractive on a one-month basis, given quite a few “unknowns” might not properly reflect the risk of not only the upcoming earnings being disappointing, but any change in Central bank policy and/or a less than concrete outcome in the coming meeting between Trump/Xi. A few of the short-term cycles seem to come together with DeMark indicators to suggest next week could be important heading into November. However, as always, the proof will be in the U.S. equity markets, demonstrating that a possible consolidation is likely next month. At present, Semiconductor Index (SOX) still looks to push higher into next week, and it remains difficult to fight the near-term momentum in Technology.
Overall, I am surprised at the extent of the recent rally pushing up aggressively before the details of the coming earnings, Fed policy, and Trump/XI meeting are known.
As this daily chart shows, ^SPX has moved quickly to levels just below 6900, and this channel resistance has held since July. Thus, while the uptrend remains in good shape and progressing nicely, ^SPX seems to be nearing a key level not dissimilar from what held upward progress in ^SPX back in late July, along with Late September and early October, before some backing and filling took place.
I generally feel it’s right to stay bullish and positive until trends are broken (as my channel resistance could very well prove innocuous and allow for an overthrow into November). However, it will eventually be important to see Financials participate as both this sector, along with Communication Services and Consumer Discretionary, have been negative over the last month. Moreover, there’s been some slight outperformance in defensive sectors like Healthcare and Utilities, while Consumer Staples has outperformed Consumer Discretionary in the past month.
Overall, I feel these represent minor periods of sector rotation only, and not the start of a bigger period of rotation. However, it’s not unreasonable to believe that the road is getting a bit more challenging in this week’s events, regardless of how resilient the tape seemed on Monday.
It’s important to watch how ^SPX reacts near 6900 and if the participation proves to be a bit more robust than we saw in today’s trading. Market breadth did improve a bit throughout the day, but only Technology was higher by more than 1% and no other sector rose more than +0.70% in trading. The next couple of weeks should be important to seeing how markets react to all this news, and my expectation remains that ^SPX should find resistance near 6900-6950 into next week. Stay tuned.
S&P 500 Index
Precious Metals look to have a bit more weakness this week after breaking near-term support
Precious Metals have NOT bottomed out, as was thought to be the case last week. Today’s pullback under last Wednesday’s lows is a negative short-term for both Gold and Silver, and both can likely weaken more this week before any bottom.
When measuring the first leg down (10/16-10/22) to the most recent leg down, Oct 23rd til today, it very well could prove to be equal in price terms. If this were to happen, that would result in a pullback to 3775, which I expect to be the low before a sharp snapback.
At a minimum, this should pull back to 3920 given today’s weakness, so I anticipate that this week will prove to be negative for precious metals. However, once this pullback is complete, I would argue that a push back to highs likely gets underway and should at least recapture 61.8% of this downdraft from October. However, at present, it’s premature for this to begin, and the path of least resistance for this week looks to be lower.
CFDs on Gold (US$ / OZ)
Technology looks like a sector in need of a breather in November
Technology continues to power higher and has managed to outperform all sectors on a 3-month and Year-to-Date basis, which might have been expected.
However, many parts of Semiconductors and Data Storage are getting quite stretched, and the Equal-weighted ratio chart of Technology vs the ^SPX might produce its first weekly TD Sell Setup following a completed TD Combo “13 Countdown” signal by the end of this week.
While the TD Sequential “13 Countdown” remains premature by two weeks on DeMark’s indicators, one can certainly make the case of a possible short-term top arriving in early November and some consolidation to this move.
For now, it’s right to watch Technology carefully, as if the five of seven “Mag 7” stocks have less than impressive earnings, this might serve as the catalyst for a period of consolidation to get underway.
While I remain bullish on Technology, it’s necessary to “pick one’s spots” after such a massive run-up in recent months. Thus, for the first time since the breakout back to new highs relative to ^SPX happened back in July, the Technology sector now looks very close to giving some warning signals of exhaustion, which might allow for a healthy pullback to play out next month.
RSPT/RSP
Steel/Specialty Alloys Industry group could possibly make a new all-time high monthly high close by the end of this week
Investors’ Business Daily now has the Steel-Specialty Alloys industry group rated #9 out of more than 170 industries that it tracks.
Stocks like ATI -0.62% and CRS 0.50% (Upticks) certainly play an important role in this group at present. However, a push back to new highs likely would help this rally extend even further into mid-November before some consolidation gets underway.
Overall, I felt it was important to take a close look at the Steel industry’s monthly chart as prices are getting close to making a new all-time high on a monthly close going back to 2007.
Overall, Carpenter Technology(CRS) (not shown) is part of my technical stock list (Upticks) and has just pushed back to new all-time highs again this week. This remains favorable, and I plan on keeping this on the list.
Steel-Specialty Alloys
