Near-term trend remains negative for SPX until 6770 can be exceeded, and despite the three-day bounce, more will be needed to help restore the technical health in US Equities after last week’s breakdown. This week’s bounce has proven encouraging so far with regard to breadth improvement. Yet some broad-based strength is thought to be necessary, given the bifurcation being seen in many parts of Technology. Both Consumer Discretionary and Industrials have shown some strength in the last few days, which is a good sign given that NVDA broke down to the lowest daily close since late September. Transportation stocks have suddenly begun to turn higher sharply, given the progress in many of the Airline stocks, and this area looks interesting as an area of possible mean reversion higher into year-end. Overall, given that a December FOMC rate cut is still uncertain, I still feel that a choppy market for now makes more sense for FOMC vs. a straight shot back to new highs given the bearish weekly momentum in US Indices. However, I remain open to all possibilities given the historically good seasonality trends during this time of year, coupled with lackluster sentiment.
Overall, this remains a tricky time for US Equities as momentum, breadth, and trends have all worsened in recent weeks. However, there has been some noticeable bifurcation present within Technology as GOOGL 1.52% and AAPL 0.38% are doing quite well, whereas NVDA -2.82% broke down on Tuesday to the lowest levels since late September.
One can’t grow too bearish on US Equities if stocks like AAPL 0.38% and GOOGL 1.52% are at record highs. Despite NVDA -2.82% ’s 8% weighting in ^SPX, both AAPL 0.38% and GOOGL 1.52% combined account for over 10% of ^SPX and are indeed important.
My thinking is this bounce likely could find resistance just ahead of the Thanksgiving holiday before some backing and filling. Thereafter, a further bounce could get underway.
As shown below, 6770 was not yet exceeded for ^SPX. Moreover, there also lies some important resistance near this upper trendline connecting the late October peaks. From an hourly basis, it appears like five waves higher are being formed, which is constructive for the idea that even on a stall out into end of week, that pullbacks would likely be buyable.
However, since last Friday’s lows, ^SPX has gained more than 200 points while weekly MACD remains strongly negative. Such a combination makes it difficult to simply expect SPX rallies back to new highs right away ahead of FOMC.
My thinking continues to be that ^SPX likely could prove choppy in December, but ultimately could resolve this consolidation by a push to new highs. More evidence of meaningful sector strength could be important in this regard to help add some conviction.
S&P 500 Index
NVDA breakdown doesn’t look to be an immediate compelling technical opportunity in my opinion
Tuesday’s breakdown resulted in NVDA -2.82% hitting the lowest levels since late September. Given no evidence of DeMark-based exhaustion near the lows, I tend to view breakdowns like this as negative in the short run and not immediately buyable.
While NVDA -2.82% managed to bounce to close near the highs of the session, more technical strength will be required to help this close positive for the week and regain its weakness before being able to weigh in too positive.
My NVDA -2.82% cycle shows that mid-December into early February could be a bullish time for NVDA -2.82% . However, it does not seem to bottom in late November. I’ll monitor this further in the next couple weeks.
NVIDIA Corporation
AAPL broke back out to new highs
Whereas the ^SPX #1 ranked stock by market capitalization broke down to multi-month lows, the number 2 weighted stock by market capitalization, AAPL 0.38% , broke back out to new all-time highs.
Technically, I expect AAPL 0.38% to likely strengthen into mid-January before any real resistance and do not see this breakout as being problematic. Rather, I feel this is a bullish move which is much needed in this market.
Apple Inc.
DJ Transportation Avg has begun to make a very bullish technical move
As seen below, the DJ Transportation Avg (TRAN) has quickly rallied back to within striking distance to early November highs.
This is a very constructive technical move in a short period of time following a lengthy four-month sideways period of consolidation since July.
My view is that TRAN likely will break back out to new monthly highs in December which could allow this to advance up to 18,000.
Momentum has improved quite a bit and structurally this pattern resembles a Cup and Handle pattern with meaningful resistance at 16,504.
It looks right to overweight Transportation stocks as a group, which could be making a late-year mean reversion back higher, and any close above 16,504 would be very bullish for this group (and subsequently to Industrials).
Dow Jones Transportation Average Index
Airlines look to be on the verge of breaking out and have led Transportation in the last week
“Don’t look now”, but Airlines are beginning to show some meaningful strength which is precisely what’s needed to help the DJ Transportation Avg. along with the overall Industrials complex.
Over the last five trading days, AAL 2.82% , UAL 3.50% , DAL 2.44% , LUV 3.43% , and ALK 2.46% are all up more than 5%, representing five of the top six best performing of the 20 stocks which make up the DJ Transportation Avg.
JETS 2.80% , shown below, (US Global Jets ETF), has risen sharply for the last two days, arguably breaking the minor trend from early September.
This looks like a bullish sign technically and should drive this initially up to challenge $27, which approximated the peaks from early 2025.
A continued strengthening in Airlines should help the DJ Transportation Avg. likely break out to new monthly highs in December.
U.S. Global Jets ETF
Homebuilders have broken out of their recent downtrend and should be a group to overweight given heightened chances of rate cut
As mentioned last Friday, Homebuilders look attractive and likely should be a group to overweight during this bullish time.
Tom Lee has consistently advocated owning this sub-sector given its seasonally bullish tendencies between October and May.
Today’s breakout of the downtrend from September is what was necessary to see to have some conviction about a sharp rally back to highs in this group at a time when the FOMC’s rate cutting cycle has just gotten started again.
Stocks like BLDR 8.40% , LEN 6.86% , DHI 5.78% and PHM 5.39% are all stocks to favor for outperformance in the near-term ,in my view, and should help the slowly improving Consumer Discretionary sector to mount a December comeback.
State Street SPDR S&P Homebuilders
