Mega-Caps Keep SPX Bullish Despite Weak Breadth
The market remains in a cautiously bullish regime. The rally continues, and fighting the trend can be risky; as mentioned yesterday, using specific levels to identify a bearish reversal is more effective than trying to anticipate one.
Market breadth remains weak: just 41% of the stocks listed in the $S&P 500(.SPX)$ are above their 20-day moving average, and only 46.5% are above their 50-day moving average. In the Weekly Compass, we discussed the importance of maintaining at least 50% participation, a threshold currently only being met by the 200-day moving average. This essentially shows that while momentum is bullish, there is a significant divergence. Proceeding with caution is essential, as the rally is narrow and driven by a few mega-caps.
We are already seeing some stocks signal potential reversals. Today, $Micron Technology(MU)$ lost its central daily level of 799, let’s keep an eye in the indecisive daily candle, a preliminary warning signal. $Advanced Micro Devices(AMD)$ , on the other hand, recovered from its pre-market lows but is still facing resistance at the monthly level of 457.7.
Those two and $Intel(INTC)$ are showing signs of indecision, but momentum rotated today in semiconductors since $NVIDIA(NVDA)$ and $Broadcom(AVGO)$ rallied over 4% and 5% respectively.
This is a good moment to recap the Setup Blueprint posted every Saturday, which outlines targets for the Magnificent Seven, U.S. indices, ETFs, and other mega-caps.
Some of the Setups posted on Saturday for this Week:
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Throughout the week, we can see clean moves like NVDA, which had a weekly target of 223 (+4%) and an extended target of 232 (+7.9%). That level was surpassed this week without ever breaching the invalidation level (Central Weekly Level / CWL) of 209 (Again, the table below was posted on Saturday).
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$Amazon.com(AMZN)$ was identified as bearish last Saturday considering its technical situation, with a weekly target of 268 (-1.7%), contingent on the CWL remaining as unbroken resistance. The bearish move has been clean.
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Intra-week volatility is always a factor, and other targets may be reached in a more “bumpy” way. AVGO is a good example: it breached its CWL of 424.7 on Tuesday but recovered it today with conviction. In this case, using today’s Central Daily Level of 413 helped identify the bullish reversal signal.
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