The key thing to look at is the way QQQ is trading – it is holding short-term support but has not rallied as much as we thought it could. TLT is finally through 100, but there is still some resistance in this general area.
This pullback should have more to run, but the beginning of this week, if not the whole week, should be up. We believe that if there is to be a real transition away from fossil fuels, energy generation will come from what we have called a “cocktail” of sources – and one of the most important components of this will be nuclear.
In last week’s Chartbook, we noticed several Dividend ETFs had perked up. This is in line with our forecast that this area of the market would improve in the second half of 2024.
We continue to hold extra cash, for a buy point later this year, while ultimately expecting higher prices into the end of 2024. We do want to mention that XLF, XLV, and XLI, sectors we have been recommending all year, are doing better than Tech short-term.
We have looked at the indicators, and it still looks as if we could see a dip from this area, starting later in the week, that will lead to a buying opportunity in late September to early October. Our fixed income forecast continues to be a drop in rates into the end of 2024, then potential problems in 2025. The Yen looks to be starting a basing pattern that could last for several years.
The message here is to be a bit careful of Tech holdings, have some benchmarks in for trading positions especially, and also to deploy new money into other sectors.
We are through the first resistance for QQQ in the 458 - area and could test the 473 to 475-area, but this move is looking a bit tired on some key stocks.
We continue to have some concerns after this short-term oversold condition resolves itself. You can see that the daily stochastic is in buy mode, but the weekly is not even oversold so more time is likely needed to set up for the rally into the election that is our forecast. Over the course of 2024, we have mentioned that while Europe has improved it should underperform the US, and we have no change to that forecast.
We ran the models on SPY, QQQ, and IJR. While all of them pulled back last week, IJR remains the strongest by far. If QQQ closes below 445, then next support level is 400 and then 360. XLE has moved down to the bottom of a trading range. There are layers of support between 88 and 85 that should hold at least the first part of this decline.
We believe that in many cases a stock will rally (or decline) in advance of news and fundamental developments, and some AI names may very well be at that stage right now. RWJ has a value tilt, as it is weighted by revenue of the companies in it. It is a good chart, worth buying, starting to break out.
We continue to rate this market a hold as we expect a rally into the election after our projected pullback. The move in small cap relative to large cap is real and supported by at least some accumulation.
Note the formation on QQQ looks a bit like a short-term Head and Shoulders top, with an objective of 450 or lower (that area is good support, though). TLT below 91 would suggest a move down to 85 at least, and possibly lower. This would be a surprise to the markets, and to me as well, but the technical indicators suggest this is possible.
On last Thursday’s call we suggested moving new money into value and smaller cap names, and this still seems prudent. Be ready if rates start to go in the “wrong” direction. If you are in the Chinese market, keep risk management in mind.
While we are not surprised to see the market up at the beginning of the week on bank earnings and such, breadth and small cap have been strong enough that this may be one of those cases, although to be sure we want to see the end of week numbers. We are noticing that sectors that performed well after Trump was elected in 2016, such as XLI and XLV, are performing well now. One of the keys to this rally is the performance of TLT and the prospect for rate cuts.
Small Cap sprang into life, a bit of a surprise. Put/Call Indicator, While not horrible, these numbers also are in the area that has marked short-term peaks over the last few years.
We continue to look for some corrective action starting here in July, and running into a low before the election, with a rally into the election. This is a newsy week, with bank earnings on Friday. For us, the most important news comes at the end of the week, when we see bank earnings as well as Delta and Pepsi.
Of interest to technicians is that we have had negative weekly breadth on the NASDAQ since May 24th. This should be a very interesting, and pivotal week. Watch the Yen, it could start a surprising rally from this area.
We ran Accumulation Models on the stock indexes and even with June’s strength, the SPY and QQQ models are diverging from their indexes. We continue our discussion of China with a look at Chinese Small Cap. Spoiler alert – it does not look good!
