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The near-term uptrend from last Thursdays’ lows remains intact for $SPX despite the late day jitters, and minor weakness hasn’t been sufficient to shake the uptrend that started with last Thursday’s successful reversal off the lows. Until/unless 3600 is breached, it’s still expected that SPX should push higher up to 3800-3845 which should serve as strong initial resistance. Interestingly enough, sectors like Technology have come to life this week, despite Treasury yields not rolling over. Moreover, despite a rapid push higher in yields over the last few days, Equities have managed to stand their ground, and SPX remains up over 200 points off the lows from last Thursday. This won’t continue if rates show much further upward acceleration, but it’s still likely that this rate rise is in the final innings, and trend reversals get underway by early November which take yields lower and in turn, fuel growth and Technology. Bottom line, it’s right to stay the course barring a move under 3600 and first upside target lies just above 3800.
Technology looks to be trying to turn higher
Interestingly enough, despite rates continuing to skyrocket this week, Technology has been slowly starting to consolidate in relative terms. However, Thursday’s early trading brought about a very sharp 2%+ rise in Tech despite rates holding firm near recent highs.
Despite equities pulling back from early day gains, Tech stood its ground, and finished flat, which proved to be outperformance over the SPX.
As shown below, DeMark indicators used on ratio charts of Technology vs the Equal-weighted SPX, shown as $RYT (Invesco’s Equal-weighted Technology ETF) divided by $RSP (Invesco’s Equal-weighted SPX) managed to turn up sharply to multi-day highs today relatively speaking.
This outperformance successfully confirmed a “13 Countdown Buy” based on TD Sequential (DeMark indicator) and suggests that Technology might be beginning a period of outperformance.
The recent consolidation at a level right near former lows gave some initial clues about a possible bottoming process, but Thursday’s outperformance helped this to officially confirm this counter-trend exhaustion signal. Furthermore, these signals are now lining up in unison on both daily and weekly charts for the first time since the August 2022 peaks.
Semiconductors look to be trying to turn higher, but Thursday’s move seemed quite broad-based in the sector, as Tech Hardware, Software and Semiconductors all showed outperformance.
Bottom line, Tech looks to be in a good position to rally into end of year relatively speaking, and I expect technically that this sector will show more evidence of absolute strength once interest start to rollover.
XLE breaking out to match recent strength in OIH
It seems like Crude oil’s bottoming out is having a positive effect on many different parts of Energy this past week. This group is a technical overweight and one of the better to expect outperformance from in the next few months.
OIH took an early lead in turning up early this week, as was discussed in my technical reports. Moreover, $XLE and $XOP have now also begun to show evidence of technical breakouts following Crude’s sharp rally in recent days.
Overall, $HES, $MPC, $LNG and $OXY are stocks which look quite attractive within Energy, and outperformance is expected to continue in this group.
Large Cap Growth vs. Value testing important support
Given Technology’s decline in recent months, it might be expected that Large-Cap growth has imploded in its relationship to Large-Cap Value. Despite this having occurred in Small and Mid-caps, this doesn’t look to have happened in the Large-Cap space, and intermediate-term uptrends in Russell 1000 Growth to Russell 1000 Value have successfully held intermediate-term uptrends.
It’s thought that once interest rates start to rollover, Growth stocks should gain further traction, and this ratio should be able to hold and turn back higher.
At present, from a style perspective, it’s proper just to point out that Large-Cap still is very much preferred over Small-cap, and that Large-cap Growth continues to outperform Value much better than Mid-Cap or Small-cap Growth vs. Value in recent weeks and months.
