Minor stalling out in Equities occurred to kick off the new week on light volume; Yet, trends and momentum remain bullish and there hasn’t been sufficient evidence of weakness to weigh in on a possible reversal. Prices managed to successfully rebound from early losses into a bullish end-of-day close which could lead higher by Tuesday/Wednesday of this week.
The big development for the last few trading days has centered on the counter-trend bounce which has occurred in the US Dollar as well as US Treasury yields. This has resulted in some consolidation in the Metals trade, but should prove short-lived and any further weakness in precious and base metals along with metals and mining stocks should be buyable on weakness this week.
The bounce in the Large-Cap Banks has continued higher, in a follow-through trade from last week’s stabilization. This is seen as a positive for markets at a time when many expected ongoing downward pressure in Regional banks. S&P Banks index rose by more than 1% in Monday’s session.
While cycles in AAPL suggest possible weakness in the back half of April through May, the stock has shown little to no evidence of rolling over. Technicals still point to the possibility of $AAPL strengthening into $170 into late April with a probable maximum move to $176.
China’s $FXI, meanwhile, rose to multi-day highs and this also looks like a bullish area to position in the short run.
Regarding near-term direction in SPX, we’ve seen Thursday’s rally from last week fail to follow-through thus far, but yet also little evidence of prices rolling over to break existing uptrends. Given Banking strength and Semiconductor weakness being contained near key support, a rally back above last week’s highs looks likely.
Gains could help SPX near the critical 4200 level. Yet, this level remains the key hurdle for upside progress for those expecting that SPX can and will exceed resistance and strengthen into May.
Bottom line, it’s expected that US stocks might face some time-based resistance in late April and weaken into May, which should present buying opportunities near May expiration. At present with no evidence of this having gotten underway, I’ll hold out on discussing the cycles which could be turning down into May until its time. However, this could materialize between 4/20 and 4/27 as a possible peak on gains into late April.
Grains look bullish- Wheat starts to turn back higher amidst possible Black Sea deal closure
Grains look to be finally starting to join the rally having been started by Energy and then followed by many Energy and Metals commodities in recent months.
Daily closes back at new three-day highs appears quite bullish for Wheat, lining up with the news story of a possible upcoming closing of the Black Sea grain deal. (UN had successfully brokered a deal with Turkey between Moscow and Kyiv that allowed for safe passage/Black Sea export of Ukrainian Grain.)
DeMark indicators have lined up in recent days to show a confluence of TD 13 Countdown (Buys) exhaustion on both daily and weekly charts, which both support the idea of Wheat rallying.
Overall, downtrends remain intact, but momentum has picked up on the recent stabilization. Movement over $7.25 would constitute a technical breakout, which arguably should result in a rally initially back to $7.90-$8.00.
I feel like Wheat is an excellent technical risk/reward for the next 5-7 weeks between now and late May, and Grains could witness further strength before some seasonal June weakness.
Several choices are available for those who wish to participate in a possible rally in the Grains. Invesco’s DB Agriculture Fund ($DBA) is one choice to consider. Teucrium offers a Wheat Fund ETF that’s based on Wheat Futures. However, volume remains sub-par and not heavy enough to make this a viable consideration.
Front Month Wheat Futures, shown below on daily Bloomberg charts.
Sentiment quite negative in Wheat, and could drive short covering on rally back above
CFTC data on Non-commercial futures positioning for Wheat has now hit the lowest levels since early 2018. This has shown a huge flip-flop in positioning since 2018 and is now negative by over 66k contracts by large Traders (Hedge funds).
Thus, sentiment is very negative at a time when prices have gotten oversold, DeMark exhaustion is now present on both daily and weekly charts, and there stands a realistic probability that the Black Sea grain deal could be shut down.
Resistance initially lies near $7.20-$7.25 but the act of reclaiming this would likely lead immediately towards $7.90, the former February 2023 peaks.
FXI push to multi-day highs adds to conviction about a rally
The China Large-Cap ETF, $FXI, has just exceeded the downtrend of the last few months. This is a bullish development and should lead prices up to test and exceed the important area near late March highs near $30.
The China reopening story continues to gain traction lately, and we’re seeing a combination of Central bank liquidity along with bullish economic data help Chinese Equities show some constructive signs of technical basing. (Home prices and Home sales improvement being the latest positive data points.)
Technically speaking, this has been beneficial in bringing about some stabilization and a much-needed bounce following nearly a two-year decline in $FXI. The area shown below by the green horizontal line marks the “neckline” of what’s widely discussed as representing a reverse Head and Shoulders pattern.
Rallies up to $30 look likely and a move over this level would be quite constructive technically speaking, allowing for the start of a rally back to test and exceed 2023 highs ($33.38 in $FXI) Note, these are initial moves only and intermediate-term targets will be discussed after FXI successfully exceeds $33.
Overall, my thought on China started to improve last week and Monday’s development looks like a clear positive towards expecting additional upside continuation for FXI.
Stocks like $BABA and $TCEHY are basing, but some of the stronger names like $NTES, have broken out on Monday to multi-month highs along with having surpassed a multi-year downtrend.
