*No video today, please see my CNBC appearance this evening*
Following nearly two weeks of sideways churning, Tuesday’s minor breakout likely jumpstarts the short-term seasonal boost into early December. While defensive groups largely outperformed over the last week, Tuesday’s gains on bullish breadth helped SPX finish at new multi-day highs, breaking a minor consolidation pattern. Wave structure, seasonality and short-term cycles all point towards higher prices into/post-Thanksgiving which could stretch up into early December before serious resistance sets in. Overall, this remains a short-term uptrend as part of an intermediate-term downtrend; However, above 4015 in S&P Futures has little to no real resistance until 4120 area which would allow for wave equality and signals strong resistance.
Daily SPX charts show why 4120 is more important than the 200-day moving average (m.a.)
One of the common misconceptions revolves around the use of the 200-day moving average and whether that’s as useful as some claim it to be. On both prior rallies, SPX was able to successfully regain its 200-day m.a. into both late March and mid-August before seeing rallies fail. Thus, while some feel that technicians “always” look at the 200- day m.a., my studies have convinced me that price/time alignment and wave equality mean far greater to markets than the position of a 200-day m.a.
Overall, the six-week uptrend has helped SPX gain more than 11% since mid-October. Yet this remains part of a larger downtrend, and until greater strength out of Technology appears, or more evidence of Treasury yields beginning a bigger breakdown happens, it’s going to be right to sell into this move into December upon SPX pushing above 4100.
If/when more evidence of Technical strength within Technology appears, then it will be right to acknowledge this. However, for now, the lack of large-cap Technology and growth rallying sufficiently after a meaningful breakdown vs. Value are reasons to consider lightening up technically speaking. Overall, I expect a 3-5% rally, and then expect that markets likely stall out and possibly reverse course.
Tuesday’s performance looks to be a game changer, near-term after a week of defensive trading
Following nearly a week of choppy uneventful trading, Tuesday’s lift spurred on by outperformance in Materials, Financials, Communication Services and most importantly, Technology, gives some confidence that the 11/22 push to new multi-day closing highs likely has some room to advance in the near-term.
As performance shows below, today’s gains in Energy and Technology helped to take both of these sectors back to nearly unchanged on the week. Furthermore, while Materials and Energy don’t count much towards SPX weightings, it remains a good one-day of participation that should help SPX push up 3-5% into December.
Given that volume likely will drop off even further on Wednesday and likely remains quite light on Friday’s session, there’s a good likelihood that Tuesday’s liftoff likely will not be reversed in the short run.
The 60-year cycle, which has proven to be an excellent guide for SPX nearly all year, showed strength into early December before consolidating, and this year’s gains very well could replicate this pattern yet again.
Ethereum likely can stabilize and rally in the short run as Stocks bounce; However, trends still point to a possible period of weakness in December following a bounce.
Ethereum looks to be trying to stabilize after having fallen to test prior lows from early November near $1070. This area looks to be a make-or-break level of short-term support, and the appearance of DeMark’s TD Buy Setup as an exhaustion signal might give way to a small bounce over the next 1-2 weeks. However, trends look to have turned sharply downward with the decline on 11/09, which occurred on much heavier volume than what’s been seen over the last couple weeks. It’s thought that $1200-1220 might serve as resistance to a bounce, and above could lead temporarily up to 1302, or 1445 which are additional important short-term resistance levels to gains. Overall, it’s thought that minor bounces likely could lead to a final washout, which might give some counter-trend signs of exhaustion that might be more compelling towards thinking a meaningful low could be in place. However, that requires $1070 to be broken, which would tilt the odds towards an immediate pullback to 880, or below to $682 which would be quite attractive from a risk/reward perspective. Bottom line, more is needed to expect a meaningful low, but it does appear like a minor bounce can take hold from current levels, technically speaking.