The near-term trend for US Equities has turned back to positive, given that both SPX and QQQ have convincingly pushed back over last Thursday’s highs. While rebuilding the prior breadth and momentum will take time, this week’s sharp rally is certainly helpful, as many different parts of the market participated in this move. The Equity market seems to be growing more comfortable as the chances for a December rate cut have grown this past week. Given that the last four days have been straight higher, hourly RSI has pushed to the upper end of its range. I still feel that a choppy market for now makes more sense into 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.
I am a bit more constructive on the prospects for a positive December, given the sharp rally this week, which has helped market breadth to begin to rebound after a difficult early part of November. While I still believe that some backing and filling can happen post-Thanksgiving, I find the rebound in sectors like Consumer Discretionary, Industrials, and Financials constructive to the thinking that some broad-based rallying could be likely into year-end.
Overall, the bigger picture is largely unchanged. I am expecting that Equity markets likely could consolidate gains after Thanksgiving holiday next week. Thereafter, it should be likely that a push back to new highs could get underway, which might show the best acceleration after the FOMC meeting next month.
Make no mistake. Despite a strong four days of bounce off the lows from last Friday, the weekly MACD remains negatively sloped for ^SPX. Indeed, the last rolling one-month period still shows just three sectors out of 11 having achieved positive performance for the last month: Healthcare, Energy, and Materials. Meanwhile, Technology has been the worst of all the sectors since late October.
However, I suspect that should be starting to change as stocks like NVDA 1.23% attempt to stabilize after the recent breakdown failed to take this stock lower. While technical trends remain far better in stocks like AMD 3.87% , AVGO 3.02% , AAPL 0.17% , STX 3.21% than in stocks like NVDA 1.23% , I do suspect that the stock has a sharp rally from mid-December into early February before some weakness takes hold.
As this QQQ 0.95% chart shows below, the rally from last Friday’s lows has proven sharp and symmetrical off the lows. Additionally, price managed to surpass and close above the downtrend line from late October, along with last Thursday’s intra-day peaks. Thus, two things look possible to say based on this pattern below:
- The decline from late October looks complete.
- A new rally looks to have started, given the linear bullish wave structure from last week’s lows.
Overall, I suspect that if this pattern is correct, then the price likely won’t show too much more strength before this starts to consolidate next week.
However, this likely could prove short-lived before a push back higher.
Invesco QQQ Trust Series
Performance data shows that Equities require some further strength to repair some of the recent damage.
This past week’s strength ahead of the Thanksgiving holiday has helped most sectors show better performance over the last four trading days than they have all last month.
That’s encouraging, but we’ll still need to see stocks like NVDA 1.23% break back over areas where this violated support earlier this week.
If what I’m thinking is true, then recent outperformance in Energy, Healthcare, and Consumer Staples should all start to show some downward mean reversion between now and year-end.
Energy in particular remains quite weak, and I anticipate that WTI Crude oil likely finishes 2025 near the lows of the year.
Invesco S&P 500 Equal Weight ETF
Russell 3000 breadth shows “Percentage Stocks above 20-day moving average” reaching its highest since late August
This week’s sharp rally has been helpful in allowing many sectors to begin to rebound, which had been hard hit.
As seen below, the percentage stocks above their 20-day moving average (m.a.) have jumped above levels that were seen in late October when markets peaked. At that time this number reached 61%, whereas current levels show 71% of all stocks now above their 20-day m.a..
This is a good sign, and a similar move has also taken place with the “Percentage of stocks above their 50-day m.a.” which has rebounded to above 54% compared to 51.8% in late October.
Keep in mind that the peaks in October occurred following a rally from 10/10 lows, whereas current levels have been reached after just four trading days of gains.
This has the potential to create a breadth thrust, which would be helpful to markets during the holiday season, but for now, it is premature.
iShares Russell 3000 ETF
Industrials Sector SPDR ETF (XLI) has recaptured prior lows
Technically speaking, I always find it refreshing when sectors break down sharply under strong support and then regain these levels.
This happened this week with the XLI 0.71% , which broke support that had been tested three prior times from July, and since has recaptured this level.
Part of this strength has been due to the Airplane outperformance, which I mentioned last night within Transportation. However, other names like BLDR 2.55% , LII 1.91% , JBHT 0.80% , MAS 1.71% , and IR were all up more than 8% in the rolling five-day period.
This is constructive for Industrials and should help to jump-start performance in this sector after a lengthy consolidation.
As shown below, XLI broke down sharply but regained the prior lows near $150.50 and exceeded the mild downtrend in the process. I still view the Industrials sector as an “Overweight”, technically speaking.
Industrial Select Sector SPDR Fund
