The markets traded in a much wider range in the past trading week. Over the past few days, we had seen the markets and the VIX inching higher, i.e., moving in the same direction. In the previous technical note, we had expressly mentioned this concern as instances of VIX and the Index rising higher simultaneously often end up showing a warning sign of an impending corrective move. The last trading day of the week saw the Index swinging wildly. During the week, the Nifty oscillated in a 446.65 range before closing the week on a flat note. The benchmark Index posted minor weekly gains of 55.90 points (+0.25%)

There is something more that needs to be noted from a technical perspective. While the Nifty has stayed flat, the volatility has shown a huge spike. This is evident from the India Vix spiking by a massive 33.80% to 14.62. This continues to show some quantum of uneasiness in the markets. More so, the rise in the VIX and the NIFTY over the past few days has made the markets vulnerable to profit-taking bouts like the one seen on Friday. Historical data shows that often through such behavior, VIX has ended up issuing prior warnings to any impending profit-taking bout. The NIFTY did mark its fresh lifetime high of 22794.70; however, the 22775 level still remains an immediate top for the markets as it was not taken out convincingly. In short, so long as Nifty stays below 22775, it is likely to consolidate in a broad trading range showing volatile moves on either side.

Monday is likely to see a stable start to the trade. The levels of 22650 and 22775 are likely to act as potential resistance levels. The supports come in at 22300 and 22050 levels.

The weekly RSI is 65.61; it stays neutral and does not show any divergence against the price. The weekly MACD stays bearish and trades below its signal line. A Doji has been formed on the candle; its emergence near the high point has the potential to disrupt the ongoing trend in the markets. Historically, Doji’s have been more potent comparatively to form reversals; however, they would need confirmation on the next bar.

The pattern analysis of the weekly chart shows that Nifty continues to trade in a small rising channel and the 20-week MA which is currently placed at 22045 happens to be the nearest support for the Index. If this level gets violated, then it would be the first sign of the markets likely taking some breather and the present trend getting temporarily disrupted.

All in all, the markets are likely to adopt some defensive bias in the future; we may see some defensive pockets doing well over the coming days. Some technical rebounds too can be expected. However, it is strongly recommended that we use these technical rebounds as and when they occur to protect the profits at higher levels. Fresh purchases should be made extremely carefully and only in the stocks that are developing or bettering their relative strength against the broader markets. 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) show that only Nifty Metal, Auto, and Consumption Indices are inside the leading quadrant. Among these, though the Auto group is seeing some paring of relative momentum, these groups are likely to relatively outperform the broader markets collectively.

The Nifty Commodities, Energy, Midcap 100, Realty, PSE, PSUBank, Infrastructure, and Pharma indices are inside the weakening quadrant. They are expected to slow down on their relative performance; individual stock-specific shows may be seen.

While Nifty IT continues to languish inside the lagging quadrant, the FMCG and Media Indices are seen improving on their relative momentum against the broader Nifty 500 index.

Banknifty, Nifty Financial Services, and Service Sector Indices are inside the improving quadrant; they are expected to continue bettering their relative performance against the broader markets.

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

In this edition of StockCharts TV‘s The Final Bar, Dave opens The Final Bar mailbag to answer viewer questions on the Nasdaq Bullish Percent Index, the value of long-term technical analysis techniques, how sentiment indicators relate to the market trend, and how the CMT program helped him improve his technical analysis approach.

This video originally premiered on May 3, 2024. Watch on our dedicated Final Bar page on StockCharts TV!

New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.

The weaker-than-expected jobs report gave the stock market some direction, a nice treat before the 150th Kentucky Derby. Job growth slowed, and the unemployment rate ticked up to 3.9%. If this trend continues, the market may price in more than one interest rate cut this year.

This week’s price action gives the impression that the stock market is still uncertain and can’t decide which way it wants to go. It’s unclear whether Friday’s move is enough to carry the market higher.

The broader equity market indexes moved higher on the news. The Dow Jones Industrial Average ($INDU) and S&P 500 ($SPX) reached their 50-day simple moving average (SMA) but didn’t close above that level. The Nasdaq Composite ($COMPQ) managed to move above its 50-day SMA as several tech stocks moved higher; however, the index didn’t show much upside conviction.

Tech Back in the Lead

View live chart here.

The daily chart of the Technology Select Sector SPDR ETF (XLK) below shows the breakout from the recent downtrend. It will be interesting to see if XLK can break through the resistance of its 50-day SMA. 

CHART 1. DAILY CHART OF XLK. The ETF broke its recent short-term downtrend, but a breakout above its 50-day SMA is critical.Chart source: StockCharts.com. For educational purposes.

The rotation back into the tech sector shows that investors are still gravitating toward technology stocks. Apple (AAPL) may have helped ignite interest when it reported better-than-expected earnings. Apple’s stock price experienced a steep downfall, which may have now reversed.

Follow the live chart.

Apple’s price shows strength after its significant gap up, following the earnings report (see chart below). The StockCharts Technical Ranking (SCTR) score (upper panel) is moving higher and is now shy of 50. Its Relative Strength Index (RSI) is also close to the 70 level. This would be a stock to add to your ChartList.

CHART 2. APPLE SOARS AFTER EARNINGS REPORT. Will the rise in Apple’s stock price have enough momentum and follow through to push it higher?Chart source: StockCharts.com. For educational purposes.

Shares of Nvidia Corp. (NVDA), Microsoft (MSFT), Amazon (AMZN), and Meta (META) are trading higher. If you want to add more tech stocks to your portfolio, you may want to wait to see some follow-through to the upside before jumping in.

The Big Picture

The market pretty much made up the losses for the week, but the broader equity indexes haven’t pushed through their resistance levels. They climbed higher in the early trading hours, but stalled and stayed relatively flat for most of the trading day. Anyone who was watching the markets will know it was like watching paint dry for most of the day. It is Friday, and investors may not want to add positions, especially since the market looked like it was in correction territory this week.

The Dow gapped up in the early trading hours, but hung out at its 50-day SMA. The S&P 500 broke out to the upside of what looks like a bear flag formation, but it also hung on to its 50-day SMA. The Nasdaq Composite is looking the most bullish of the three indexes, as it broke above its 50-day SMA but hung out there.

Follow the live chart.

Even bond prices were stagnant. The daily chart of the iShares 20+ Year Treasury Bond ETF (TLT) shows that bond prices rose, but didn’t move much for most of the trading day.

CHART 3. DAILY CHART OF TLT. Bonds prices rose on Friday, but still have a long way to go before showing signs of an uptrend.Chart source: StockCharts.com. For educational purposes.

The good news: The CBOE Volatility Index ($VIX) is back below 15 levels, an indication that investors aren’t necessarily fearful and the market didn’t fade at the close.

There’s not much economic data next week. There are a few earnings to pay attention to, but a big chunk is in the rear-view mirror. The market could continue its indecisive behavior next week. We’ll have to wait and see. It may be a good time to put your stock market thoughts aside and shift your focus to watching the Derby.

End-of-Week Wrap-Up

S&P 500 closes up 1.26% at 5127.78, Dow Jones Industrial Average up 1.18% at 38,675.88; Nasdaq Composite up 1.99% at 16,156.33$VIX down 7.97% at 13.51Best performing sector for the week: UtilitiesWorst performing sector for the week: EnergyTop 5 Large Cap SCTR stocks: Super Micro Computer, Inc. (SMCI); Vistra Energy Corp. (VST); Vertiv Holdings (VRT); MicroStrategy Inc. (MSTR); Coinbase Global Inc. (COIN)

On the Radar Next Week

Several Fed speechesEarnings from Berkshire Hathaway (BRK/B) reporting on Saturday, BioNTech (BNTX), Walt Disney (DIS), Palantir Technologies (PLTR), and Duke Energy (DUK), Uber (UBER), among others.

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.

Stocks fell sharply into late April and then rebounded over the last two weeks. SPY fell 5.34% from March 28th to April 19th and then rebounded with a 3.26% gain the last two weeks. Does this bounce have legs? Chartists can separate serious bounces from dead-cat bounces using breadth. Today’s example will use the S&P 500 and the percentage of S&P 500 stocks their 20 day SMAs.  

There are two steps. First, the indicator needs to become oversold (setup). Second, we need to see a significant increase (breakout) in upside participation (signal). An oversold reading signals a significant decline and provides the setup for a bounce. Aggressive traders can trade the oversold condition. A subsequent move above the breakout level signals adequate participation to sustain the advance. Now comes the subjective part. We must choose our oversold and breakout levels. I am choosing 10 and 70 percent for SPX %Above 20-day SMA.

The green shading on the chart above shows when SPX %Above 20-day became oversold and the green arrow-lines mark the subsequent move above 70%. There were setup-signals in March-April and again in October-November. Both led to significant bounces. Notice the red shading where the indicator failed to clear 70% in mid October. This was a feeble bounce and SPY moved to a new low in late October. SPX %Above 20-day then surged above 70% in early November for a signal.  Recently, the indicator became oversold here in mid April for a setup and moved back above 50% this week. An oversold bounce is indeed underway, but I need to see a move above 70% to show a participation breakout.

We are monitoring the rebound in the S&P 500 and Nasdaq 100 at TrendInvestorPro (ChartTrader). Our 10 indicator composite indicator became oversold in mid April, but we have yet to see the required breadth thrust to signal a strong increase in participation. ChartTrader reports and videos provide broad market timing signals and trading setups for leading stocks and ETFs. This week we featured setups in the T-Bond ETF (TLT), the Biotech SPDR (XBI) and four Tech ETFs (IGV, SOXX, CIBR, SKYY). Click here for immediate access.

//////////////////////////////////////////////////

In this episode of StockCharts TV‘s The MEM Edge, Mary Ellen reviews the key drivers for this week’s volatile period, including Core PCE and GDP numbers. She takes a look at where the S&P 500 and NASDAQ closed for the week and whether it’s safe to put new money to work. Several stocks gapped up into base breakouts, and Mary Ellen covers these as well.

This video originally premiered May 3, 2024. Click here or on the above image to watch on our dedicated MEM Edge page on StockCharts TV.

New episodes of The MEM Edge premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

As investors flock to Omaha, Nebraska in their annual pilgrimage to learn from the great Warren Buffett, it seems an opportune time to reflect on the technical evidence for Berkshire’s biggest holding, Apple (AAPL).

Today, we’ll consider AAPL using “multiple time frame analysis”, in which we analyze the same stock from three different time frames. This allows us to think about how the short-term fluctuations relate the medium-term trend, and how the medium-term trend fits into the longer-term secular trends at play.

First, let’s consider the short-term time frame using the daily chart.

After an earnings release this week that disappointed investors on weaker iPhone sales, yet thrilled investors at the announcement of the largest buyback in Apple’s history, the stock gapped higher on Friday above the 200-day moving average. After the last two months of lower highs and lower lows, combined with RSI levels very consistent with bearish phases, the stock finally appears to have reversed that downtrend with higher prices and improved momentum.

For now, remaining above the 200-day moving average after the gap higher on Friday remains the most important factor on the daily chart. It will be very telling in the days and weeks to come if additional buyers are willing to step in and pay even more for this long-term market outperformer!

For the medium-term time frame, let’s consider the last ten months of price action, starting with the July 2023 high around $197. After achieving that peak, AAPL pulled back to a 38.2% retracement of the 2023 rally phase, finding support right around $169. Over the subsequent seven-to-eight months, Apple has been rangebound, bouncing between retests of the all-time high before returning down to test support in the $165-169 range.

This week’s gap higher appears to confirm that support in that range has once again held strong, giving a clear floor to the price action for the last year. With improving momentum, in the form of the RSI pushing above 60 on this rally, the stock appears to be strengthening. But until we see a confirmed break above the previous high around $197, I’m inclined to label the medium-term time frame as “neutral.”

Now let’s consider the long-term trend using the weekly chart.

Quite simply, the long-term picture for AAPL is exceptionally strong. Since the 2009 market low, the stock has experienced numerous tests of an ascending 150-week moving average. And in 100% of those tests, the stock has rebounded higher, eventually making a new all-time high soon after.

Note the RSI levels on the weekly chart, showing that the momentum remains in the bullish range since late 2018. This suggests that the long-term momentum is positive, and that pullbacks to moving average support should be considered opportunities to capitalize on short-term market weakness.

Do you think Apple provides a decent opportunity in Q2, after pulling back to test long-term moving average support? Watch the video below, and then drop a comment there with your vote!

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.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.

The author does not have a position in mentioned securities at the time of publication. 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.