With only a few hours left in the month and an imminent release of the announcement from the FOMC many in the market are only focused on daily or weekly price swings. So far it has been a good month for stocks with the Invesco QQQ
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One thing is clear no matter what happens in the last few hours of Wednesday trading, the monthly charts and technical studies are positive. They show no signs of a change in the major trend, so let’s take a look.
From the monthly chart of the Spyder Trust (SPY ), the decline from the July 2023 high was completed in October as the 20-month EMA was tested. It now stands at $487.55 and it is rising. January will mark the third straight month of solid gains. The resistance (line a) was overcome with November’s solid gains. The yearly R1 resistance is at $511.18 with the monthly starc+ band at $517.55. The new yearly pivot is at $441.58
The monthly S&P 500 Advance/Decline line has been above its 21-month EMA since early 2016. The trading range from early 2022, line a, was completed in November as it has subsequently moved to further new highs. The NYSE Stocks Only A/D line was also in a trading range (line b) as it moved back of its EMA in November and has not yet made new highs. The NYSE All A/D line shows a similar formation as it also closed below its WMA in October 2023 before it reversed to the upside.
The Invesco QQQ Trust (QQQ) follows the Nasdaq 100 Index that has been leading the stock market higher for most of the past 10 years. The three-month decline from the July high ended in November 2023 as QQQ closed above the downtrend, line a. It now looks ready to move to the yearly R1 at $462.11 and the monthly starc+ band at $453.97. The firmly rising 20-week EMA is at $350.63.
The Nasdaq 100 Advance/Decline line broke to new highs and above long-term resistance, line b, in November. The A/D line is well above its EMA and therefore is getting extended.
The relative performance (RS) is the ratio of QQQ to the S&P 500. When it is rising and is above its EMA, as it has been since the start of 2023, it signals that QQQ is leading the S&P 500. During the tech bear market of 2022, the RS was below its EMA as QQQ declined more than the S&P 500.
The surge in small-cap ETFs like the iShares Core
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The S&P 600 Advance/Decline line is still barely above its EMA as it declined in January. The on-balance-volume (OBV) is trying to move back above its EMA. Both of these indicators make monthly close in February more important as a higher monthly close is needed to support my bullish outlook.
If the major averages close lower this week then we could see a further decline. It will not alter the bullish outlook from the monthly charts. Having taught technical analysis for 40 years the insights they gain from the monthly charts often surprise my students. In late 2007 the monthly A/D lines turned negative after forming lower highs or bearish divergences which warned of a bear market. One seems very unlikely in 2024.
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