Trend still bullish- Expecting upcoming push back above SPX-4225
Wednesday’s multiple attempts at taking SPX lower during the day failed, and prices managed to finish the day higher by nearly +0.50%. Meanwhile, NASDAQ finished at the highest levels since last August, 2022.
While NASDAQ is certainly a bit stretched, it remains early to peak out technically based on near-term price structure and time. Rallies into next week would bring US Equity indices closer to more meaningful resistance.
Wednesday’s About-Face in Treasuries back higher(Yields lower) along with Equities as the US Dollar fell all look like important short-term developments. Bottom line, trends from last week’s lows along with technical projections remain short-term bullish for rallies into next week.
Financials look close to bottoming. Regional Banking ETF $KRE managed to confirm a TD Sequential buy signal on Wednesday for the first time since the February 2023 peak. While many, including myself have pointed out that TD Combo Exhaustion had formed, TD Sequential has now lined up with Combo to signaling that a snapback rally should be right around the corner.
Overall, Wednesday’s sharp rally in Technology looked important towards signaling a period of near-term strength for Technology into next week. However as has been mentioned in prior days, many of the large-Cap Growth stocks within Technology which have the largest capitalizations like AAPL, MSFT, META, look close to hitting resistance, which I feel happens in 3-5 trading days. However, the broader technology sector likely will be unable to recoup the damage done in May, which happened to the Semiconductor sector, and a Tech bounce likely stalls out next week.
Furthermore, if my analysis is correct, Consumer Staples and Utilities should likely wane and lag performance into the middle part of next week before bottoming. Charts on Staples were shown Tuesday evening.
Bottom line, keeping a close eye on Financials remains important for US Equities. Stabilization in Regional Banks and rally should lead Small-caps to bounce, and I expect this does happen into May expiration before a possible stalling out period for US equities.
However, the drop in US Treasury yields and the US Dollar along with the rally in Equities, all should have jumpstarted their movement today, Wednesday, 5/10, and a continuation of Wednesday’s move looks likely into next week.
(Repeated for emphasis (From Tuesday 5/9/23 Note) Overall, it’s looking increasingly likely that the mid-month turning point for Equities which could materialize from 5/17-5/24 could turn out to be a high, not a low. Rallies back to and above 4200 would have the effect of emboldening investors while the area of 4250-4325 should prove quite important as resistance.
QQQ daily chart, shown below, illustrates that price has broken out to new highs for 2023. While I suspect that upside might prove limited to QQQ-328, and above would lead to a maximum area (in the short run) of 334, this price action remains quite constructive.
Treasury yields look to be rolling back over, and recent bounce looks complete
The four-day bounce in $TNX looks to be complete following the giant reversal which happened in US 10-Year Treasury yields on Wednesday, 5/10/23, right near ongoing trendline resistance.
Yields pulled back to new three-day closing lows, and should help trends start to work their way back lower down to test and breach recent yield lows made in early May.
Bottom line, until/unless 3.63% is exceeded, this looks like an appealing time for Treasury longs, expecting rates to pullback to test and break 3.25%.
Eventual targets could materialize near 3.15%, and below that lies the psychologically important 3.00% support level.
UPTICKS-Long Addition– Mastercard (MA-$382.54)
MA’s recent progress in 2023 has helped to propel this stock to the top tier of performance over the last one, three and six-month periods (MA is in the top 10 performers out of all 73 names within XLF in each timeframe)
This boost in relative strength is apparent on daily charts , which show the stock to have advanced to within striking distance of all-time highs. While many in the Regional bank space remain under pressure, the credit card companies within Financials look more attractive for long positioning, expecting outperformance.
Former all-time highs happened back in April of 2021, giving way to a lengthy period of consolidation. This took the form of a decline into October 2022 followed by a rally to within reach of all-time highs. Resistance should materialize at $400 initially, or around 5% higher from current levels.
However, this broad base should eventually give way to a push back to new all-time high territory given its increasing amount of tests since the initial peak was made just over two years ago. Momentum is nearing overbought levels, but remains positively sloped, and the ability to have recently surpassed late 2022 highs makes this an appealing technical risk/reward in the near-term within a sector that’s fallen out of favor in recent months.
Overall, MA looks attractive on a short-term basis technically and the act of climbing back above $400 would add to its intermediate-term appeal. Support on pullbacks should materialize near $370.
UPTICKS-Long Addition- Intuitive Surgical (ISRG- $302.59)
ISRG looks technically attractive at current levels following a big jump in momentum in recent months. This stock has been the 3rd best performing stock of any within the SPDR S&P Healthcare ETF ($XLV) with a return of +23.37% in data through 5/10/23. Its push last month to exceed former December 2022 peaks at $185 was thought to be bullish and should allow for near-term upside to $326. (Additional upside resistance lies near late 2021 peaks at $369.69) ISRG has begun to show attractive relative strength within the Healthcare sector at a time when Medical Devices stocks have shown marked technical improvement in recent weeks. Equipment stocks look more attractive than Biotechnology, and ISRG should likely be able to outperform in the months ahead given Healthcare’s seasonally strong performance, which normally lasts through July. While weekly momentum has neared overbought levels, pullbacks should offer a chance to buy dips, with $285-$295 being a sweet spot for downside support in the weeks to come. Overall, momentum and technical structure remain positive, and ISRG looks attractive here technically.