Sunday Post - Recap & Week Ahead 7/21/2024
The Nasdaq fell 3.6%, breaking a six-week string of gains as several mega-cap technology stocks slid for the second week in a row. The S&P 500 posted a smaller weekly decline of around 2%, while the Dow Jones was an outlier with a nearly 1% gain. On the other hand, US small caps outperformed its large-cap counterpart for the second week in a row. The Russel 2000 index´s surge of 7.7% over two weeks was the clearest indicator of a market rotation. Moreover, US large-cap value stocks outpaced their growth counterparts for the second week in a row, chipping away at the growth style’s YTD performance leadership in another sign of a shift in market sentiment. Meanwhile, the $VIX rose to the highest level in nearly three months and seasonality suggests that this recent surge in $VIX could be the beginning of a larger move. See chart below.
The ES market made a new all-time record high early in the week and then sold off hard. As shown in the daily chart below, it is now moving towards the back-test of the previous upward channel from the October 2022 low (pink solid lines), the daily 50 MA and the steeper upward channel support from the October 2023 low (black dashed lines). These areas will act as support if the market decides to move further down.
As usual, I will do a quick recap of this week´s market action, followed by an analysis of the general markets and the different sectors, and finally write about the outlook for next week.
Recap:
Early in the week, the ES market made attempts at breaking above the 7-Day Balance, but the Buyers lacked traction and the market would sell back down (failed breakouts). However, on Tuesday, the market did make a new record high of 5721.25 before selling off. As a result, the Bearish scenario from the prior Sunday Post worked out perfectly. Once the weekly Pivot of 5661 was taken out, the market sold off and all the downside targets were achieved and exceeded. This is what I wrote last week, "the Sellers must break and hold below the weekly Pivot of 5661 to target the 5652 level, the 5636 level and the bottom of the 4-Day Balance at the 5623 level, which are strong supports and potential turning points. If the Sellers are able to break below the bottom of the Balance, then the next downside targets are at the 5614 level (this week´s low), the 5594 level, the 5581 level (top of the prior 10-Day Balance) and the daily 20 MA/the 5565 level.” The market eventually found bottom below the 5548 level at 5542.
General Markets and Sectors:
Check out the updated Charts Page which goes with this section.
The S&P 500 made a new all-time record high early in the week and then sold off towards the 5451-support level/daily 50 MA. Resistance is now at 5638.
The NDX/Nasdaq sold off breaking below the 19978 support (now resistance) and moved right to the 19470 support (near daily 50 MA).
The Dow Jones made a new all-time record high and then sold off towards the 40000 support. Resistance is at 41198 and next support is at 39391 (daily 50 MA).
Small Caps (IWM) moved higher to the 227-resistance level (around January 2022 high) and then sold off towards the 212 support.
The FFTY index broke below the daily 50 MA and moved lower right to the upward channel support. Let´s see if it holds, if not, a break of the channel would take the market down to the daily 200 MA.
The $VIX jumped higher and is now Bullish. I did point out last week of the Bullish divergences from the technical indicators.
Crude Oil sold off to the daily 50 MA/200 MA, which could act as support. Resistance is at $85 and next support is at $77.
Gold made a new all-time record high and then sold off breaking below the 2427 support (now resistance). The market moved lower to the 2392 support and if the selloff continues, next support is at the daily 50 MA.
The US 10-Year yield consolidated around the 4.21% support, which also coincides with the uptrend line from the 2023 low. There could be a bounce but, if this area is completely taken out, next supports are at 4.0% and 3.9%. Resistance now at the daily 200 MA/50 MA.
The USDJPY broke below the daily 50 MA and moved lower towards the 155 support. For the upside, the 50 MA must be reclaimed and resistance is at 160.
Bitcoin rallied higher and did indeed reclaim the 58355 resistance (now support) and the daily 200 MA (also uptrend line from October 2023 low). The market moved back above the daily 50 MA and the 64200 resistance (now immediate support). Could see new highs soon but must first break above the 69000 and 73121 resistances.
Semis, SOX sold off and broke below the daily 50 MA but remains in an upward channel.
Consumer Disc, XLY moved higher early in the week but failed to clear the March 2022 highs and sold off. Remains in an upward channel.
The Retail sector, XRT moved higher back inside the upward channel from the November 2023 low, but then sold off breaking the upward channel support and moved to the 75 support/daily 50 MA.
The Tech sector, XLK sold off and moved back inside the upward channel right to the daily 50 MA, which could act as support.
Transports, IYT continued to move higher but then sold off towards the daily 50 MA/200 MA, which are supports.
Financials sector, XLF made a new record high and then sold off some.
The Materials sector, XLB bounced off the daily 50 MA and then sold off back to the 50 MA. This market is in consolidation since March.
Industrials, XLI broke above the upward channel resistance and made a new all-time record high. This market then sold off and back-tested the upward channel.
The Health sector, XLV also made a new all-time record high and then sold off towards the daily 50 MA/upward channel support.
Consumer Staples, XLP bounced off the daily 50 MA but then sold off some. This market remains in consolidation mode since May.
Utilities, XLU moved below the daily 50 MA and consolidated in this area.
The Energy sector, XLE moved higher breaking above the daily 50 MA, which is now support.
YEAR-TO-DATE RETURN:
SPX S&P 500 +16.3%
IXIC Nasdaq +18.5%
DJIA Dow Jones +8.0%
SOX Semiconductor Index: +28.4%
XLK U.S. Technology Sector: +15.1%
XLF U.S. Financial Sector: +14.8%
XLU U.S. Utilities Sector: +12.5%
XLE U.S. Energy Sector: +11.9%
XLI U.S. Industrials Sector: +10.3%
XLP U.S. Consumer Staples Sector: +10.0%
XLV U.S. Health Care Sector: +9.2%
XLB U.S. Materials Sector: +6.2%
XLY U.S. Consumer Disc Sector: +5.5%
XRT U.S. Retail Industry: +5.2%
IYT Dow Jones Transports: +1.7%
Week of 7/22/2024:
United States - advance Q2 GDP growth rate, PCE inflation, personal spending and income, S&P Global Manufacturing and Services PMI, durable goods orders, and existing home sales. Earnings season continues.
Manufacturing and Services PMI data - Australia, Japan, India, France, Germany, the Euro Area, and the United Kingdom.
Germany - Ifo business climate and GfK consumer confidence indices.
Interest Rate decision - Bank of Canada, Central Bank of Turkey, and People’s Bank of China.
South Africa - inflation rate.
South Korea - GDP growth rate.
Currently, the ES market is in a Bearish Imbalance phase and the Sellers remain in control. See hourly chart below. The Sellers must defend the 5581 level (top of prior 10-Day Balance) and tomorrow´s daily Pivot of 5568/the 5565 level for more downside. Once this week´s low of 5542 is taken out, the targets are at the 5532 level, the 5519 level and the 5509 level, which are strong supports and potential turning points. If the Sellers have traction, then the next downside targets are at the 5497 - 5491 area, the 5483 level (daily 50 MA), the 5473 level and the 5465 level, which are all strong supports and potential turning points. Conversely, the Buyers must move the market back above the 5565 level/tomorrow´s Pivot of 5568 to target the 5581 level, the 5594 level (daily 20 MA), the weekly Pivot of 5606, the 5614 level and the bottom of the 7-Day Balance at the 5623 level, which are all strong resistances and potential turning points. If the Buyers have traction and are able to move the market back inside the 7-Day Balance area, then the next upside targets are at the 5636 level, the 5652 level, the 5664 level, which are also strong resistances and potential turning points. As usual, I will provide an update with my daily thoughts and game plan in tomorrow´s post before market open with additional clues from the OVN session.
PLEASE SEE INTRO POST AND READ DISCLAIMER/INTELLECTUAL PROPERTY