The Tuesday afternoon selloff brings the broader indexes close to key support levels. In the first half of the trading day, the S&P 500 ($SPX) and Dow Jones Industrial Average ($INDU) were trading slightly higher. The Nasdaq Composite ($COMPQ) was the leader in the morning hours. But towards the last couple hours of the trading day, all three indexes sold off.

The bigger question is how much damage two down days in a row caused. With the broader stock market indexes rising to new highs, seeing two down days in a row is a bit disappointing. But a selloff is healthy, especially as we approach the end of the year, as long as the bullish trend is still intact.

The chart of the S&P 500 and Nasdaq Composite below shows that both indexes have an upward trending 21-day exponential moving average (EMA). However, the S&P 500 is getting close to its November high, which is a valid support level. The Nasdaq has a ways to go before it reaches its November high. A closer support level is a low of the December 4 price move, a gap up.

FIGURE 1. S&P 500 AND NASDAQ COMPOSITE SELL OFF. Although the bullish trend is still in play, watch the support levels and moving average convergence/divergence (MACD) for signs of a downtrend.Chart source: StockChartsACP. For educational purposes.

The moving average convergence/divergence (MACD) in the lower panel shows that the S&P 500 is the weaker of the two indexes, technically speaking. Since October, the MACD has been relatively flat while the S&P 500 was rising. The MACD for the Nasdaq was in a slight incline while the index was rising.

The good news is that the seasonally strong part of the month is yet to come. December and January tend to do well with the Santa Claus rally, the January Effect, and the January Barometer, three seasonal patterns discussed in the Stock Trader’s Almanac. The Cboe Volatility Index ($VIX) remains low, which is another variable that supports the bullish move in equities. We should get more clarity on Wednesday after the November CPI data is released.

Precious Metals Rise

While equities were selling off, gold and silver prices started inching higher. The surge in gold prices can be attributed to China’s central bank deciding to buy gold, something it hasn’t done in several years.

Gold prices pulled back to the 100-day SMA after reaching an all-time high at the end of October. Since then, it has been trending higher and could make another attempt to reach its high (see chart of gold continuous contract below).

FIGURE 2. GOLD FUTURES TRYING TO BREAK OUT OF A RESISTANCE LEVEL. If gold prices break above the resistance level, price could make an attempt to reach its all-time high.Chart source: StockCharts.com. For educational purposes.

Tuesday’s low coincided with the 50-day SMA, and the high coincided with previous highs. You could say that $GOLD traded between a support and resistance level. A successful break above Tuesday’s high would confirm that gold prices could aim to reach an all-time high.

A few geopolitical events surfaced this week that may have contributed to the rise in crude oil prices, which saw Treasury yields rise slightly. But these could be short-lived news-driven reactions.

NVIDIA’s Slide

One stock I’ll be closely watching is NVIDIA Corp. (NVDA). The Chinese government is investigating the company for antitrust activities. NVDA closed below its 50-day SMA on Tuesday with a declining StockCharts Technical Rank (SCTR) score of 50.20. The MACD is also indicating slowing momentum (see chart below).

FIGURE 3. NVIDIA’S STOCK PRICE FALLS BELOW 50-DAY MOVING AVERAGE. In addition, the SCTR score is at 50, which indicates weak technical strength. The MACD shows momentum is declining.Chart source: StockCharts.com. For educational purposes.

A further decline in NVDA’s stock price, which makes up about 7% of the S&P 500, could lower the index’s value.

The bottom line: November CPI will be released on Wednesday morning, 8:30 AM ET. Economists estimate a 2.7% year-over-year increase while the core CPI is expected to rise 3.3%. This would dictate Wednesday’s price action.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

As the year winds down, investors are beginning to position their portfolios for the New Year. I’m considering it, and perhaps you are too.

Next year, in addition to the seasonal rotations among sectors, we have a plot twist: a new administration in D.C. likely to bring disruptive policy changes affecting the market.

The Financials sector is expected to perform well under the new administration. If that’s the case, it’s worth taking a closer look at this sector and identify which stocks to watch for potential buy opportunities. If you’re already considering financial stocks and looking to fine-tune an entry before year-end, then consider those that have pulled back or are trading in a tight, low-volatility consolidation range—prime candidates for a potential bounce.

How can you spot these opportunities? One way is to use MarketCarpets’ Bollinger Band Width setting.

On Monday, I used this tool with the Latest Value setting, which provides a score between 0 to 100. The closer to zero, the narrower the BandWidth. The narrower the BandWidth, the greater the likelihood of spotting a “squeeze” leading to a significant price move or a breakout.

FIGURE 1. MARKETCARPETS BOLLINGER BAND WIDTH SET TO LATEST VALUE. It won’t be surprising if most of the big stocks on the list with the lowest value exhibit similar patterns.Image source: StockCharts.com. For educational purposes.

If you look at the table on the right, you’ll see that the three biggest stocks with the lowest chart values are Visa (V), Mastercard (MA), and Berkshire Hathaway B shares (BRK/B). If you were to continue scrolling, the three big banks with the narrowest Bollinger Bandwidths are Bank of America (BAC), Morgan Stanley (MS), Goldman Sachs (GS), and JP Morgan Chase (JPM). For many investors, some of these shares are quite expensive. So, let’s consider that and focus on the stocks that are more relatively affordable to most readers: BAC, MS, and JPM.

Before diving into these stocks, let’s examine the sector’s breadth using a daily chart of the S&P FInancial Bullish Percent Index ($BPFINA). We’ll also compare the relative performance of the Invesco KBW Bank ETF (KBWB) as a proxy for the large U.S. banking industry against the Financial Select Sector SPDR (XLF), which represents the broader financials sector.

Sector Breadth and Relative Performance of Banks vs. Sector

The $BPFINA shows the percentage of stocks signaling Point & Figure “buy” signals. Right now, 91% of S&P financial stocks are flashing buy signals (see below).

FIGURE 1. FINANCIAL SECTOR BULLISH PERCENT INDEX. The Financial sector is bullish but potentially oversold.Chart source: StockCharts.com. For educational purposes.

While a BPI figure above 50% is bullish, above 70% signals that the sector is potentially overbought. On an industry level, the banking industry is outperforming broader financials by 11% and rising.

Bank of America

Let’s get to the stocks, starting with a daily chart of BAC.

FIGURE 2. DAILY CHART OF BANK OF AMERICA. Is the stock poised for a big move up or down?Chart source: StockCharts.com. For educational purposes.

There’s a lot here, so I’ll bullet the key points:

BAC’s technical strength, as measured by the StockChartsTechnical Rank (SCTR) is slightly declining, but at a level just below 70, it signals only slight weakness.The Bollinger BandWidth has decreased significantly, and BAC’s price is above the lower band. This doesn’t signify a squeeze as much as a low volatility pullback. But what are the chances that BAC is likely to decline further?On a relative performance scale, BAC is slightly underperforming its industry, down barely 2%.In terms of momentum, there’s a divergence between indicators: On Balance Volume (OBV) suggests high buying pressure, possibly driven by retail investors, while Chaikin Money Flow (CMF) indicates strong selling pressure, likely reflecting institutional activity.

BAC is one of the largest US banks, so I’d add it to my ChartList as a possible prospect for a longer-term investment. However, given the mixed technical signals, I consider this a wait-and-see moment, observing how price reacts at current levels and whether the OBV and CMF can align if BAC continues its move to the upside.

How does BAC compare with Morgan Stanley?

Morgan Stanley

Let’s take a look at a daily chart.

FIGURE 3. DAILY CHART OF MS. The stock’s performance, as measured by SCTR, is performing slightly better than BAC.Chart source: StockCharts.com. For educational purposes.

MS’s SCTR score, at 83, is stronger than BAC’s and close to the 90 level, which might be considered exceedingly bullish.As its Bollinger BandWidth narrows, the stock has also fallen below support, coming out of a rounding top, and looking to fill the wide gap made at the beginning of November.MS is slightly outperforming its industry peers by slightly over 3%, better than BAC’s relative performance.Selling pressure, however, is strong, and the OBV and CMF appear to align.

This appears to be a classic pullback scenario. I would add this to my ChartList, as MS is one of the biggest players in the industry, but I’d wait for a bounce and monitor a bullish reversal in both the OBV and CMF before considering a long position.

JP Morgan Chase

Finally, let’s look at the last big bank on my list: JP Morgan Chase. Below is a daily chart.

FIGURE 4. DAILY CHART OF JPM. The divergence in the OBV and CMF is something to watch carefully.Chart source: StockCharts.com. For educational purposes.

JPM’s SCTR score of 76 is declining, yet still relatively bullish.Its Bollinger BandWidth indication is similar to the two we just viewed. In JPM’s case, traders seem hesitant to commit to any direction as price settles right below the middle band. It’s as if they’re waiting for some indication to trigger movement in one direction or another. Regarding relative performance, JPM is barely outperforming its industry peers, by a little over 1%.Similar to the BAC example, there appears to be a potential, yet prominent divergence between retail buying and institutional selling, as the OBV has been climbing while the CMF has been steadily declining.

JPM is sitting in a near-term holding pattern. It’s going to break eventually. But for now, the market appears unable to commit to a given direction, and the mixed momentum signals seem to support this view. It’s best to monitor this on my ChartList and wait for stronger bullish signals and a definitive reversal to the upside before jumping in. In short, patience.

At the Close

Planning the coming year, I focused on a given sector (Financials) and used MarketCarpets’ Bollinger BandWidth setting to identify stocks with tight, low-volatility setups that might signal a breakout opportunity. This led me to BAC, MS, and JPM. While these stocks remain on my ChartList as longer-term prospects, I’m opting for a wait-and-see approach. Fine-tuning an entry is important. And while there are many ways you can do this, I just showed you one approach that might just come in handy given the right circumstances.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

In this video, Dave unveils his “line in the sand” technique to help determine when stocks in established uptrends may be near the end of the bullish phase. He’ll share specific levels he’s watching for the S&P 500, AMZN, TMUS, and KR, and also review three tools on the StockCharts platform you can use to monitor potential stop loss levels for stocks in your portfolio.

This video originally premiered on December 10, 2024. Watch on our dedicated David Keller page on StockCharts TV!

Previously recorded videos from Dave are available at this link.

Looking for options trade ideas? In this video, Tony presents some of the best options trading strategies! After discussing special 0DTE strategies, the big picture, and individual sectors and industries, Tony covers bullish and bearish ideas for stocks including NVDA, SHOP, GOOGL, META, CAT and many more.

This video premiered on December 9, 2024.

Today Carl looks at the 26 indexes, sectors and groups in a CandleGlance to see how the indexes stack up. It is clear that all of the indexes are as good as they can get. Carl warns that when things are as good as they can get, the only place left to go is down. Overbought conditions can persist, but it is certainly an attention flag.

Today Carl took us into the Semiconductor (SMH) industry group to discover how the group is weighted.

Carl also gives us his overview of the market in general and then covers the Magnificent Seven in the short and intermediate terms. Which ones are set up bullishly and which two are struggling?

Erin takes over and talks about sector rotation by going through the sector CandleGlance to see where aggressive and defensive sectors stand currently. There are clear winners and losers.

The pair finish the trading room by going through viewers symbol requests that includes looks at Palantir (PLTR) and Super Micro (SMCI).

01:22 DP Market Scoreboards

02:46 Semiconductor (SMH) Weighting

04:57 Market Overview including Dollar, Gold and Crude Oil among others

13:47 Magnificent Seven

17:31 Market As Good As It Gets

22:47 Sector Rotation

31:02 Symbol Requests

If you’d like to join us LIVE on Mondays at Noon ET, register here: https://zoom.us/webinar/register/WN_D6iAp-C1S6SebVpQIYcC6g#/registration

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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2024 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

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SCTR Ranking

Bear Market Rules

Despite attempts to break higher, Tractor Supply Co. (TSCO) may be setting up for a potential move lower. Recent price action and valuation concerns suggest that TSCO’s upside might be limited in the near term.

In this analysis, we’ll outline the technical signs of weakness, delve into the fundamentals that appear stretched, and review a limited-risk options strategy to capitalize on a bearish outlook. All of this was identified instantly using the OptionsPlay Strategy Center within StockCharts.com, demonstrating how subscribers can uncover similar opportunities instantly.

From a technical standpoint, TSCO has shown troubling signs:

Failed Breakout. After initially breaking out above the $290 resistance area in October, TSCO has failed to maintain any meaningful follow-through. Instead, it has slid back into its prior trading range between $265 and $290.Underperformance and Negative Momentum. This inability to hold higher ground has coincided with relative underperformance versus the S&P 500. As the stock struggles to sustain gains, negative price momentum suggests increasing downside risks.

FIGURE 1. DAILY CHART OF TRACTOR SUPPLY CO. The stock is retreating toward its previous trading range between $265 and $290. Tractor Supply is also underperforming the S&P 500, and the MACD indicates momentum is slowing down.Chart source: StockCharts.com. For educational purposes.

Beyond the chart, TSCO’s fundamentals raise questions about its valuation:

Modest Growth, High Valuation. With an expected EPS growth of just 7% and revenue growth of 4%, TSCO’s top and bottom line expansion trails its industry peers. Yet the stock trades at a hefty 25x forward earnings multiple.Slim Margins and Rising Debt. A net margin of only 7% offers limited cushion to navigate headwinds, especially as the company’s debt load increases each quarter. Paying a premium multiple for modest growth, narrow margins, and escalating leverage challenges the justification for TSCO’s current valuation.

Recent earnings announcements provide mixed signals. On the positive side, Q3 2024 net sales rose by 1.6%, and gross margin improved by 56 basis points, reflecting some operational efficiencies. The company also reported EPS in line with expectations and pursued strategic acquisitions like Allivet to bolster its pet product segment. However, TSCO faced a slight decline in comparable store sales, a 5.3% decrease in net income, and missed analyst sales estimates. Sluggish discretionary spending and higher expenses have also weighed on performance. Looking forward, TSCO must navigate a delicate balance between growing sales and managing costs—an increasingly challenging task if consumer spending remains tepid.

Options Strategy: Call Vertical Spread

To position for a potential downside, the OptionsPlay Strategy Center suggests selling a Jan 24, 2025 $285/$300 Call Vertical @ $5.70 Credit. This entails:

Selling January 24, 2025, $285 Call at $9.70Buying January 24, 2025, $300 Call at $4.03Net Credit: $5.70 per share (or $570 per contract)Maximum Potential Reward: $567Maximum Potential Risk: $933Breakeven Point: $290.70Probability of Profit: 63%

This neutral-to-bearish strategy generates premium income upfront and profits if TSCO remains below $290.70 at expiration (see strategy details below).

FIGURE 2. SELLING A CALL VERTICAL SPREAD IN TRACTOR SUPPLY CO. Here you see the strategy details of selling a Jan 24, 2025 $285/$300 call vertical.Image source: OptionsPlay Strategy Center in StockCharts.com. For educational purposes.

Unlock Real-Time Trade Ideas with OptionsPlay Strategy Center

 The bearish opportunity in TSCO was identified swiftly using the OptionsPlay Strategy Center, which is now available at StockCharts.com. The platform’s Bearish Trend Following scan zeroed in on TSCO as a candidate for downside exposure and even structured the optimal options trade in real-time.

By subscribing to the OptionsPlay Strategy Center, you gain access to:

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FIGURE 3. TRACTOR SUPPLY CO. WAS A CANDIDATE UNDER THE BEARISH TREND FOLLOWING SCAN.Image source: OptionsPlay Strategy Center in StockCharts.com.

Don’t miss out on valuable trading opportunities. Subscribe to the OptionsPlay Strategy Center today and streamline your trading approach. With tools designed to keep you ahead of the market, you can consistently find the best options trades and harness them efficiently every day.

Good morning and welcome to this week’s Flight Path. The “Go” trend in equities continued again this past week and we saw a full week of uninterrupted bright blue bars. Treasury bond prices painted “Go” bars and the week ended with strong blue bars. U.S. commodities also remained in a “Go” trend with the indicator painting strong blue bars. The dollar likewise was able to hold on to its trend but we saw a string of weaker aqua “Go” bars this week.

$SPY Sees Another Strong week of “Go” bars

The GoNoGo chart below shows that price continued to rally this week as the indicator painted nothing but strong blue “Go” bars again. We do see a Go Countertrend Correction Icon (red arrow) at the most recent high which warns us that price may struggle to go higher in the short term. We see that GoNoGo Oscillator has fallen out of overbought territory and is now resting at a value of 4. There is still therefore strong momentum that is confirming the underlying “Go” trend.

On the longer term chart, the trend continues to be strong. Last week saw another higher weekly close albeit on a smaller bar. We will watch to see if price can edge higher again this week. The oscillator panel shows that momentum has been able to remain positive for several months now. It is currently at a value of 5. If momentum wanes, we will look to see if it finds support at the zero level again.

Treasury Rates Fall out of the “Go” Trend

Treasury bond yields completed the transition from a weaker “Go” to strong “NoGo” bars this week. With a couple of amber “Go Fish” bars that expressed uncertainty we can see that the “NoGo” took hold first with a pink bar. This came after GoNoGo Oscillator suggested as much when it failed to find support at the zero line just over a week ago. Now we see that momentum is negative at a value of -3 and confirms the new “NoGo” trend in price.

The Dollar Still Rests in “Go” Trend

We saw the dollar spend another week moving sideways this week and GoNoGo Trend painted a string of weaker aqua “Go” bars.  We turn our eye to the lower panel and we can see that GoNoGo Oscillator has failed to find support at zero after having been stuck there for several bars. The Oscillator has now broken out of a GoNoGo Squeeze into negative territory which tells us that momentum is out of line with the “Go” trend. We will watch to see if this leads to further price deterioration.

The markets closed with gains for the third week in a row as the key indices posted gains while extending their technical rebound. The Nifty had a trending week; it trended higher most of the week. The volatility was largely absent, but the Indices stayed quite choppy on most days except the last day, where it remained flat. The volatility stayed largely subdued; the India VIX retraced by 1.98% to 14.14 on a weekly note. The trading range stayed wider; the Nifty oscillated in an 849-point range over the past five sessions. The headline index finally closed with a net weekly gain of 546.70 points (+2.27%).

The markets have paused themselves at a crucial juncture. The Nifty has closed above the 50-DMA, which is presently at 24548. It is just a notch below the 100-DMA at 24707. This level also coincides with the 20-week MA placed at 24720 on the weekly timeframe. So, unless the Nifty closes well above 24720, we have to fairly take the zone of 24700-24750 as an immediate important resistance for the markets on a closing basis. For this technical rebound to extend, moving past and staying above 24750 would be necessary for the markets. On the other hand, the Nifty has rebounded off the 50-week MA; this level, placed at 23432, is the most crucial support for the Nifty if it has to keep the current primary trend intact.

Monday is likely to see a quiet start to the week; the levels of 24750 and 24900 are likely to act as resistance levels for the Nifty. The supports come in at 24450 and 24300 levels.

The weekly RSI is at 55.52; it is neutral and does not show any divergence against the price. The weekly MACD stays bearish and below its signal line. The PPO remains negative.

The pattern analysis of the weekly charts shows that the Nifty has completed a painful process of mean reversion. At one point, the Index was trading over 10% above the 50-week MA; the current retracement saw the Nifty testing this level a couple of weeks ago. The 50-week MA test at 23463 offered strong support, and the market rebounded from those levels. Presently, the Index has closed just below the 100-DMA and 20-week MA.

The up move after the Nifty took support at the 50-week MA has seen the Index rallying by over 1200 points. There is a possibility that Nifty may consolidate again for some time before it extends the current move. The banking and financial space is exhibiting strong relative strength. While this may continue, sectors like IT, Auto, Realty, etc., will likely show good momentum over the coming days. However, the Index is near its crucial resistance zone; this makes it necessary to guard profits at current levels. It is important that instead of chasing all up moves, the prudent thing to do would be to mindfully protect gains and stay invested in the stocks showing improvement in their relative strength. A cautious approach is advised for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG shows that the Nifty Bank Index has rolled inside the leading quadrant. It is expected to relatively outperform the broader markets along with the IT, Services Sector, and Financial Services Indices that are also present in this quadrant.

The Nifty Midcap 100 index is improving relative momentum while being placed inside the weakening quadrant. The Nifty Pharma Index is also inside the weakened quadrant.

The Nifty FMCG, Auto, Energy, Commodities, and Infrastructure Indices are in the lagging quadrant. The Nifty PSE Index is also in the lagging quadrant; however, it is improving its relative momentum against the broader markets.

The Nifty Media Index has rolled back inside the improving quadrant. Besides this, the Metal, Realty, and PSU Bank Indices are also placed inside the improving quadrant.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

Chartists looking for stock setups can start with strong industry groups. The Fintech (FINX) is in a strong uptrend and leading, but looking extended short-term. While there is no setup currently, we can learn from past setups and apply these lessons to stocks within the group. 

FINX is both strong and extended. The chart shows FINX advancing 53.6% from November to March. It then moved into a long corrective period as the falling channel formed over the next five months. This correction ended with a breakout in late August and the ETF recorded its first new high in mid September. FINX extended further and led the market over the last four months.

Even though FINX shows no signs of weakness on the price chart, it is becoming quite extended because the 10-day EMA is over 20% above the 200-day EMA. The bottom window shows this difference using the PPO(10,200,0). I use this mostly as trend indicator. It turns bullish with a move above +3% and bearish with a move below -3%. These signal buffers reduce whipsaws and catch big trends.

With FINX looking extended, it is time to exercise some patience and wait for the next opportunity. The blue dashed lines show short-term bullish continuation patterns within the strong uptrend. These represent tradable pullbacks. We can use these examples as a guide in the future, and also look for tradable pullbacks individual fintech stocks.  

The indicator window shows %B, which quantifies the relationship between the close and the 20-day SMA. The pullbacks were quite mild as %B dipped below .50 just twice. This means the close was below the 20-day SMA, which is the middle line on the Bollinger Bands. A decline to the 20-day SMA signals a pullback within the uptrend and this is an opportunity, not a threat.

Extended or not, FINX is still a leader and still in a strong uptrend. This means fintech stocks provide a good hunting ground for bullish setups. Pullbacks and oversold conditions provide opportunities. This report continues at TrendInvestorPro where I feature a fintech stock with one such setup. Click here to see the full report and learn more. This week we featured tradable setups in over a dozen ETFs and stocks. 

Click here to take a trial and get two bonus reports!

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The first trading week in December started on a positive note, with the S&P 500 ($SPX) and Nasdaq Composite ($COMPQ) notching new all-time highs, while the Dow Jones Industrial Average ($INDU) pulled back slightly. Despite the small upmoves for most days, it wasn’t a quiet week.

Surprisingly, a flood of news from around the world didn’t impact equity performance much. The broader equity indexes continued their bullish trends despite South Korea briefly going under martial law, the collapse of the French government, Fed Chairman Jerome Powell’s speech, and the higher-than-expected jobs number.

The stock market’s tone is bullish, and volatility is low. The Cboe Volatility Index ($VIX) is now below 13.

This StockCharts MarketCarpets snapshot below shows the S&P 500’s weekly performance. The heavily weighted mega-cap stocks fared well, but the best weekly performer was American Airlines (AAL), with a 19.83% gain.

FIGURE 1. STOCKCHARTS MARKETCARPETS TOOL FOR DECEMBER 6. Mega-cap stocks performed well this week. American Airlines was the top performer for the week.Image source: StockCharts.com. For educational purposes.

One area to watch is the small caps. The S&P 600 Small Cap Index ($SML) broke above its trading range in early November. It then pulled back and bounced off its support level (see chart below).

FIGURE 2. DAILY CHART OF S&P 600 SMALL CAP INDEX ($SML). After breaking out of a trading range in early November, $SML pulled back and bounced off a support level. It then consolidated and broke below the consolidation range. Is it heading back to its support level?Chart source: StockCharts.com. For educational purposes.

Since November 25, the index consolidated and broke below the consolidation pattern. $SML could be on its way back to the support level between 1440 and 1450. Generally, small caps start rising mid-December and continue into the next year. This is known as the “January Effect,” so it’s likely that $SML will bounce off that support and move higher. The market breadth indicators for $SML—percentage of stocks trading above the 50-day moving average and the advances vs. decliners are also declining. I’ll be carefully watching the price action in the next few weeks.

Solid Week For Crypto

This week was a big one for cryptocurrencies. Bitcoin to US Dollar ($BTCUSD) closed above 100,000, a record close. The weekly chart below shows that $BTCUSD had a strong upward move after breaking out of its consolidation pattern from March to October.

FIGURE 3. BITCOIN SURGES. The cryptocurrency successfully closed above its 100,000 level on Friday.Chart source: StockCharts.com. For educational purposes.

The moving average convergence/divergence (MACD) is very bullish. The rise in cryptocurrency prices shows investors’ risk appetite is pretty strong.

In Other News

The broader equity indexes may have been moving up in dribs and drabs, but some stocks saw significant gains, mainly due to earnings.

Shares of Docusign (DOCU) rose on much better-than-expected earnings. Docusign’s stock price closed up by 27.86% on Friday. Lululemon Athletica, Inc. (LULU) is another stock that saw a 15.90% rise in its stock price on stellar earnings. Other retail and software companies, such as Amazon.com, Inc. (AMZN), International Business Machines (IBM), American Express Co. (AXP), and Home Depot (HD), saw significant percentage gains in Friday’s trading.

Next week, we get earnings from Adobe Systems, Inc. (ADBE), Broadcom Inc. (AVGO), Oracle Corp. (ORCL), and Costco (COST). All these stocks saw healthy gains this week. Although a big chunk of earnings is behind us, there are some exciting ones on deck.

Bond Blues in Rear-View Mirror?

Treasury yields declined while bond prices rose a little. The weekly chart of the iShares 20+Year Treasury Bond ETF (TLT) below shows TLT approaching its first resistance line. This happened before, which caught me off guard—a lesson learned. But now that bonds are creeping back up, I may give it another go.

FIGURE 4. DAILY CHART OF TLT. Bond prices are rising slowly but it may be a while before there are significant moves, given the low bond volatility.Chart source: StockCharts.com. For educational purposes.

Bond volatility is low, as seen by the ICE MOVE Index in the lower panel. This suggests that bond price movement may be small, so this time, I might wait until the next resistance level, just above $102, before I go long.

Next week is light on economic data, but we will get the November CPI and PPI. There’s also the  December 18 Fed meeting. I’d wait for these events before making investment decisions on TLT.

According to the CME FedWatch Tool, the probability of a 25 basis point rate cut at the Fed meeting is around 85%. It’s more important to hear what the Fed says about interest rate cuts for 2025. If it’s different from what the market has priced in, that will have more of an impact on the market.

End-of-Week Wrap-Up

S&P 500 up 0.96% for the week, at 6090.27, Dow Jones Industrial Average DOWN 0.60% for the week at 44,642.52; Nasdaq Composite up 3.34% for the week at 19,859.77$VIX down 5.48% for the week, closing at 12.77Best performing sector for the week: Consumer DiscretionaryWorst performing sector for the week: EnergyTop 5 Large Cap SCTR stocks: Applovin Corp. (APP); Palantir Technologies (PLTR); Reddit Inc. (RDDT); MicroStrategy Inc. (MSTR); Axon Enterprise, Inc. (AXON)

On the Radar Next Week

November Consumer Price Index (CPI)November Producer Price Index (PPI)30-Year Mortgage RateEarnings from Oracle (ORCL), Broadcom (AVGO), Adobe (ADBE), Costco (COST)

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.