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Near-term SPX trends remain bearish despite the 1% bounce on Monday, and both trends and momentum remain negatively sloped while market breadth is in dire need of immediate recovery. For now, the risk-on trade remains captive to WTI Crude oil and progress in reopening the Hormuz Strait. Monday’s selloff in WTI Crude oil, along with the US Dollar and US Treasury yields, proved to be a bullish catalyst for Equities, and Cryptocurrencies have also achieved minor short-term breakouts. In the days ahead, the Fed meeting, along with Quarterly options expiration, are both thought to be possible market-moving events, and my thinking is that bounces remain too early to trust as being legitimate. Most investors should continue to favor a heavily diversified stance and overweight defensive sectors like Utilities, Telecom, and Pharmaceutical stocks until Technology can show more evidence of stabilization, in my view. Increasingly, I’m expecting that November 2025 lows could be tested, given no evidence of WTI Crude oil peaking, and I’m expecting Monday’s selloff doesn’t prove long-lasting before another attempt to push higher, potentially next week.
It’s all about Oil right now, and until some evidence of stabilization in the Iran war, which results in WTI Crude starting to turn meaningfully lower, it’s difficult to consider a bounce like what happened on Monday to have much importance.
As can be seen below, trends and momentum remain bearish and will need to be repaired to have conviction of a meaningful low being at hand.
Despite the high level of implied volatility compared to realized “Vol”, the lack of true capitulation makes trying to buy dips still premature.
Trends for the US Dollar, US Treasury yields, and WTI Crude oil remain higher, and are thought to likely begin another push higher following a few days of consolidation this week. Keeping a close eye on all of these looks important.
Support for SPX and QQQ lies at SPX-6623.92 and QQQ-591. Movement down under these levels would likely cause downward acceleration to test last November’s lows.
The degree of negative breadth, along with volume, will have to be watched carefully on any selloff over the next 1-2 weeks.
On the upside, if/when price does manage to get above ^SPX-6845 and/or QQQ-617, this would change the technical picture for both ^SPX and QQQ to more constructive. At present, the benefit of the doubt still has to be given to “the Bears”.
S&P 500 Index
Bounce in Semiconductor stocks needs to be watched carefully on this bounce this week
My expectation is that a bounce can happen this week for many Semiconductor names, but it can’t be trusted as a technical move that has the power to push back to new all-time highs.
Given the breakdown in momentum and trends from last Fall, SMH (VanEck Semiconductor ETF) continues to show negative weekly momentum based on popular gauges like MACD.
While the Optical and Memory-based stocks look far stronger than many pure Semiconductor and Semi-cap names, it’s my expectation that the “Semi” space could prove volatile into mid-April and is difficult to make a bullish technical argument without evidence of further strength and structural recovery in SMH.
Key areas which investors should keep a close eye on lie at 386 and 374, the latter being particularly important. Any break of $374 would likely lead to 353 or a maximum area of support near $330. Any selloff down to this latter area would create an attractive entry point for those looking to buy dips for the coming 3-5 months.
Bottom line, names like CIEN, LITE within the Optical space, and memory names like MU and SNDK technically remain more attractive at present than stocks like NVDA and/or Semi-cap names like LRCX, or KLAC for this week.
However, watching closely for when the “momentum trade” in Tech starts to give way will be important, and it’s thought to be right to keep “tight stops” on steep uptrends of stocks like MU, CIEN, LITE, and SNDK in the weeks ahead.
VanEck Semiconductor ETF
Bounce in Emerging markets likely proves short-lived, but anticipating a good week for the South Korea ETF before this stalls
The “uber-concentrated” South Korean Equity ETF (EWY) suffered a steep drop of more than 20% from all-time highs into early March before its recent stabilization attempt.
This was formerly a very parabolic Emerging market ETF, so this selloff created an attractive trading opportunity for those with short-term timeframes.
Unfortunately, I don’t feel this decline has completely played out, given the negative momentum and trend break in EWY. The bounce attempt looks to have begun, but I anticipate that rallies to $139-$142 should constitute strong overhead resistance.
Until the US Dollar starts to weaken, many Emerging market ETFs (and specifically those with a heavy Technology weighting) will likely still show weakness over the next month.
Key areas to watch carefully for EWY lie at $123, and breaks of this level would result in weakness down to $116 and potentially $109.
Both of these levels make more sense from a risk/reward perspective than attempting to buy dips at current levels, given the recent technical deterioration.
Thereafter, a rally looks likely from mid-April/mid-May into August.
iShares MSCI South Korea ETF
Cryptocurrencies achieved a minor breakout, which could lead to higher prices on a 3-5 day basis. Thereafter, caution looks warranted before a larger low in mid-April
Please consider attending this week’s Cryptocurrency monthly Webinar with Sean Farrell and me as we go through fundamentals, technicals, and macro for Crypto and discuss the best risks/rewards for the weeks ahead. This takes place this Wednesday at 2:00 pm EST, and this will be taped and shown as a replay for those who can’t attend. Click here to sign up for the webinar.
Ethereum’s bounce is now following through on the initial rally, which produced minor intra-day technical breakouts on Friday, which were then promptly reversed. Given that Oil is pulling back with the US Dollar and US Treasury yields while Equities rally, I feel that all of this movement is important and positive in the short run, and the ability to hold today above 2200 for ETHUSD is a positive and should result in a rally to 2378 and eventually to near 2550-2600.
This latter area represents very strong resistance, representing a combination of a 50% retracement of the selloff from January of this year, along with the downtrend from last October, and representing the highs of the Ichimoku Cloud, which is a lot wider and more important than it was last month.
Ethereum / U.S. Dollar
Thus, my expectation is that ETH 0.83% trends up to 2550-2600, potentially over the next week, and this would be strong resistance, where this might potentially reverse back down into April. Overall, one can’t put too much credit in this low as being meaningful on an intermediate-term basis, as being a serious low, but simply a short-term period of constructive follow-through after the most recent low in early February. My larger time-based target for Ethereum happens in mid-April, and price targets will be discussed on Wednesday’s call.