Near-term US Equity trends are bullish, and Monday’s rebound helped to give some confidence to the idea that last week’s lows could, in fact, represent “the lows” for November. Price gapped higher Monday and exceeded resistance targets discussed late last week for SPX and QQQ. In fact, prices managed to recover 62% of the entire decline from the 10/29 peaks in just two trading days. Market breadth, however, didn’t give much confidence, nor did the rally in Cryptocurrencies, which still looks relatively quite weak. Overall, the rally in most Technology stocks following last week’s decline looked important, and helps to add conviction that a move back to new highs is likely in November. However, I don’t suspect this will prove to be an easy month, and I am still of the opinion that November could prove quite choppy before a move back to new highs. Initially, this could take the form of a consolidation of the recent two-day rally, which might serve to fill the open gap created by Monday’s surge. Bottom line, I am constructive on Equities, but sense that some backing and filling could happen this week before the start of a larger move higher.
Given that the endgame for the US Government shutdown seems to have arrived, I sense that the completion of this sometime this week might lead to a larger rally back to new highs.
The stabilization and resulting turn back higher in Technology is a big positive for Monday. Furthermore, both ^SPX and QQQ prices seem to have jumped back over the resistance targets mentioned last week.
While these are certainly positive, the broader level of market breadth remains a problem, and Monday’s rally failed to improve this all that dramatically, with barely a 3/2 positive reading on the rally.
Thus, while I believe that last week’s lows very well could be the low for Equities for November, I’m having a tough time expecting some immediate further follow-through right away, given that Semiconductor Indices like SOX are up against near-term resistance and the Shutdown technically has not yet been resolved.
Daily charts of ^SPX show the minor breakout of the prior selloff, and the extent of ^SPX’s rally off the lows in just two days’ time is decidedly positive.
Filling the gap from last Friday to today (Monday, 11/10) would require a move down to 6720 in the ^SPX, and I think we have to consider that a real possibility sometime this week.
Thereafter, a stronger rally off the lows on better market breadth should help SPX achieve new record highs in the weeks to come.
S&P 500 Index
Semiconductor ETF (SMH) looks to be near short-term resistance
Given that Semiconductor stocks led market performance for most sub-sectors on Monday as NVDA advanced the most in seven months, it’s logical to examine SMH (VanEck Semiconductor ETF) to see how this rally shapes up technically.
While stocks like NVDA showed great strength today, SMH does appear to be up against near-term resistance right below 360.
Similar to ^SPX and QQQ, the open gap to kick off this week very well could be filled before a stronger rally higher gets underway.
This area lies at 350 and also approximates the 50% retracement of this rally higher from last week. Technically speaking, this likely could represent strong support in the event we see some consolidation this week.
VanEck Semiconductor ETF
NVDA rally was quite strong, and following consolidation, should help to lift shares back to new highs
Given that NVDA represents the largest weighting in ^SPX, it’s no surprise that its largest move in seven months (+5.79%) resulted in a +1.5+% rally in both ^SPX and QQQ on Monday.
This managed to close near the highs of Monday’s range, which was also a technical positive.
I suspect that if Technology pauses on Tuesday following such a big move, then NVDA might backtrack on lighter volume to provide an attractive buying opportunity.
At present, I am bullish on the prospects for NVDA to regain all-time high territory, but unsure if this happens in a straight line. Given that SMH looks to be up near resistance, it wouldn’t surprise me to see some “backing and filling” this week. However, I don’t suspect NVDA retests last week’s lows, and any 50-62% retracement of the two-day move from last Friday’s lows should create an attractive technical risk/reward.
NVIDIA Corporation
Gold’s bounce might weaken into late November, given long-term interest rates are starting to lift
Technically speaking, I don’t suspect the rally in Gold will prove easy to immediately scale back to new heights.
Momentum remains negatively sloped (based on MACD), given the severe downdraft from October, and Gold has neared a 50% retracement of the entire pullback from mid-October.
Given that interest rates have started to push back higher on the long-end and could move higher given this week’s massive coupon supply, I feel that Gold likely will stall out between its 50-61.8% retracement area and turn back lower.
Ideally, Gold might test and undercut the late October lows and drift lower into late November (or even early December) before turning back higher.
My target for Gold following Monday’s close at $4115.95 in Spot Gold is $3775.
Thereafter, I anticipate that precious metals will likely begin a lengthier rally back to new all-time highs, and this might happen as rates are starting to turn back to the downside.
Overall, Gold looks attractive to buy dips in the weeks ahead, but I do not expect an immediate rally back to new highs just yet.
A three-wave Elliott-wave style decline from mid-October would represent a more attractive opportunity than attempting to buy Gold here, given the lackluster near-term momentum coupled with rising interest rates.
I’ll revisit upon Gold showing some weakness in the weeks ahead, but I sense this will be a trickier path for Gold going forward vs the rally that led this up into October peaks.
CFDs on Gold (US$ / OZ)
