Materials still an overweight as Steel pushes back to new highs

Key Takeaways

  • US equities bounce continues, but is nearing upside price targets for SPX and QQQ
  • SLX has just broken out to new yearly highs which bodes well for continued strength
  • Materials 2021 relative breakout vs SPX is now continuing and this group should continue to be overweighted for outperformance

The near-term bounce for US equities continues, and likely can extend up to levels near SPX-4550-70 for SPX and QQQ-363 for QQQ.  However, this bounce is getting extended, and I don’t expect that prices push to new highs right away, technically speaking.  Given current Elliott-wave patterns, cycles, DeMark exhaustion, and the start of negative momentum divergence on intra-day charts, I feel that February 2022 peaks should mark strong resistance for this bounce.  How one plays a possible reversal and how to position depends on one’s timeframe and risk tolerance as there remain many things still working very well.  For timing purposes, any daily close back under 4455-SPX and 350-QQQ would mark short-term sell signals into next week.

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