AI Euphoria is Taking a Breather, and Potential Reversal Setups Face Low Season Indexes
The Compass on the Edge
Market Shrugs Off Options Expiration with Mixed Action
The market closed the week on Friday displaying a lack of clear direction despite above-average trading volume, this indecision likely stemmed from a looming pullback sentiment. The mixed performance at the index level mirrored the action in mega-cap stocks. Tech titans like $NVIDIA Corp(NVDA)$ (down 3.2%), $Meta Platforms, Inc.(META)$ (down 1.4%), $Broadcom(AVGO)$ (down 4.4%), and $Apple(AAPL)$ (down 1.0%) closed lower, while $Amazon.com(AMZN)$ n (up 1.6%), $Alphabet(GOOG)$ $Alphabet(GOOGL)$ (up 1.4%), and $Microsoft(MSFT)$ (up 0.9%) bucked the trend.
Sector performance within the $S&P 500(.SPX)$ also lacked conviction. Most sectors remained within a narrow 0.7% range, except for consumer discretionary (up 1.0%) and information technology (down 0.8%), heavily influenced by their respective mega-cap components.
The weekly performance suggests a consolidation is coming considering overheated (oscillators) price action (volume + candles). A consolidation is healthy, considering the year-to-date performance:
$NASDAQ(.IXIC)$ : +17.8%
$S&P 500(.SPX)$ : +14.6%
S&P Midcap 400: +5.4%
$DJIA(.DJI)$ : +3.9%
Russell 2000: -0.3%
2024 has been moved by the tech sector, and most of charts that will be studied below suggest a top is in formation, if that is validated the week ahead could bring a hiccup to the rally considering the weight of tech in the SP 500, since it represents one third of the index:
Why Consolidation and Potentially a Local Top?
Considering the annual levels mentioned since March and highlighted last week, equities like AAPL, GOOG, META and AMZN are still finding resistance, NVDA declined -4%, which is marginal relative to the recent rally but made its contribution to a potential reversal formation in tech.
Other non tech giants like $Eli Lilly(LLY)$ and $Costco(COST)$ are also suggesting a top formation, and the 10 year note looks bouncy.
Yes, MSFT showed a weekly breakout and $Tesla Motors(TSLA)$ continues building on the bullish setup highlighted last week, so let’s study which are the bearish reversals formations (or bearish continuations like the one well anticipated weeks ago for BTC or European Indexes) that are brewing in the markets; and what are the bullish elements in contrast.
Another interesting question to study: Is a bounce in formation for DJI and IWM?
https://smartreversals.substack.com/p/ai-euphoria-is-taking-a-breather
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