No evidence of any change of trend, and repeated attempts at taking stock indices lower continue to fail. It appears likely that another 4-6 trading days of possible gains should happen which lead Equities higher into late April.
This timeframe is based upon a combination of cycles, DeMark indicator projections, and ongoing bullish April seasonality. Furthermore, trends have shown zero ability to break down, and the mild sector rotation towards Financials, Discretionary and various parts of Healthcare (Medical Devices, Biotech) are bullish factors in the short run.
Equity breadth has certainly waned a bit on the recent underperformance in Technology. However, some mild recovery has begun in Equal-weighted SPX with various sectors slowly but surely starting to rebound. The intermediate-term momentum and breadth factors are still supportive of stocks.
Treasury yields are growing closer to trading resistance, where yields likely peak and turn back lower, and US Dollar index also should weaken to test and breach monthly lows.
Commodities are likely to rebound in May, and Gold, Silver and Copper should all be overweighted for gains in the weeks/month ahead.
Overall, a move up to SPX-4200 or briefly above cannot be ruled out into late April which could begin Thursday/Friday. (4/20-21) Given the numerous eyes on this important level, any breakout would certainly drive some short-covering, and breakout buyers might emerge precisely ahead of a time of seasonal weakness next month.
Semiconductors have stalled out, yet trends remain intact
SOX weakness in April might have given some investors concern that “Semis” were starting to weaken. However, technical show us that’s not the case.
Mild consolidation looks to be the extent of this “weakness”, not any meaningful trend deterioration. SOX has pulled back for three straight weeks. Yet, uptrends for $SOX remain in place unless SOX breaks 2975.
DeMark related exhaustion has signaled “TD Buy Setups” are in place on daily charts of $SMH vs. SPY (not shown) as well as $SMH vs $RYT (Semis vs. Market and Semis vs. Equal-weighted Technology) In both cases, this recent signal tells us that this minor pullback very well could be complete, for now.
Gains back to test and exceed March highs looks possible in the next couple weeks and might lead up to 3300-3350 before any real stalling out.
Stocks like $ON, $MPWR, $AVGO, $ADI, and $NVDA are some of the more attractive names within the Semi space, and while NVDA could benefit from some consolidation, all of these names are intermediate-term attractive technically.
Signs of either a breakdown under the green uptrend line, or a move to 3300 would both suggest taking action. At present, this muddling/ recent consolidation likely still goes higher in the short run.
Medical Devices breakout should be worth following
Medical Devices looks to be playing “catch-up” very quickly to the bullish moves having been seen in many Pharmaceutical and Biotech names lately. This sub-sector of Healthcare just broke out to the highest levels since last Spring.
Wednesday’s (4/19) breakout in $IHI, the Ishares U.S. Medical Devices ETF above $56.16, or the January 2023 peaks which lie right near the August 2022 peaks constitutes a bullish breakout of a Reverse Head and Shoulders pattern (H&S)
Volume expanded to the highest levels since January as stocks like $ISRG and $ABT rose more than 7% in trading.
Overall, my favorite technical names within $IHI include: $GEHC, $TMDX, $PODD, $BRKR, and $PEN.
At present, Healthcare has been stalling in recent days but relative charts of Healthcare vs. S&P 500 are nearing the highs of its recent consolidation. It’s likely, technically speaking, that a breakout happens in Healthcare which should make this group show outperformance to the broader market in the weeks/months to come.
April Seasonality still points to gains into end of month
It’s tough trying to fight seasonality in Pre-Election April’s !!
Despite the recent slowdown in breadth and momentum in this stock market rally since mid-March, trying to fight this uptrend has proven futile for market bears.
Pre-election year seasonality typically shows April as one of the better months of the entire year as part of the pre-election year cycle.
It’s always important to study how SPX price has typically moved throughout the month in any given month of the year during the various years which make up the Election cycle.
As shown below, trends largely go up all month long, which is generally what has happened thus far.
Trends might flatten out a bit towards the 17th trading day of the month, but it’s been right to expect higher prices during April.
Average gains tend to be +2.6% in April of Pre-election years, going back over 90 years. This has proven to be the second best performing month historically behind January.
Until/unless SPX and QQQ start to break uptrends in the days to come, it’s going to be right to stick with this trend until the latter part of April.
At that time, cycles and DeMark exhaustion might come together to suggest some possible selling pressure into May. At present, there remains no evidence that this is forthcoming.
SPX April Seasonality for pre-election years is shown below, with data going back since 1929.
