The Trader Harbor
  • Business
  • Politics
  • World News
  • Stocks
  • Business
  • Politics
  • World News
  • Stocks

The Trader Harbor

Stocks

When Will the Stock Market’s Bullish Momentum Snap? Charts You Need to Watch

by admin July 11, 2024
July 11, 2024
When Will the Stock Market’s Bullish Momentum Snap? Charts You Need to Watch

With the S&P 500 ($SPX) and Nasdaq Composite ($COMPQ) hitting all-time highs and the Dow Jones Industrial Average ($INDU) trying hard to get there, are the broader indexes overstretched and ready to snap?

At the moment, all indications point to a bullish move. Investors are anxiously awaiting the June CPI data point that drops on Thursday. If it comes in much hotter than expected, there’s a chance of a selloff. But that could change during the trading day; how the market closes is more important.

The Stock Market Big Picture

Overall, the macro picture is bullish. The S&P 500 and Nasdaq Composite are trading well above their 20-day simple moving average (SMA). This is predominantly driven by the price action in the Magnificent Seven stocks. Apple (AAPL) and Tesla (TSLA), two stocks hit hard earlier this year, have overcome their tailwinds and are trending higher.

The bullish outlook may not be as rosy outside of the large-cap AI-related world. Look at the daily chart of the S&P 500 Equal Weighted Index ($SPXEW) below.

CHART 1. THE S&P 500 EQUAL-WEIGHTED INDEX ON THE VERGE OF BREAKING OUT? Look for the index to break above the triangle pattern and the bullish MACD crossover to confirm the market’s bullish move.Chart source: StockCharts.com. For educational purposes.Though not hopeless, it’s still got some room to cover before hitting new highs. $SPXEW is consolidating in a large triangle pattern and has avoided breaking below the lower side thus far. It’s been closer to the lower line in the last few days, but Wednesday’s 0.89% rise has brought it closer to the pattern’s upper side. This is something to watch closely.

The Moving Average Convergence/Divergence (MACD) oscillator in the lower panel shows the lack of upside momentum at present. However, the histogram has moved just above the zero line, and it looks like the MACD line has just crossed above its signal line. If this crossover follows through, there’s a chance $SPXEW could break through the upper triangle line and reach its all-time high. This would be a further optimistic indication of the overall bullishness of the equity market.

If you isolate the Technology sector and look at the Nasdaq 100 Equal-Weighted index ($NDXE) chart, you’ll see that it’s inching up towards hitting new closing highs. However, the Nasdaq 100 index ($NDX) is outperforming $NDXE by about 17%.

CHART 2. NASDAQ 100 EQUAL-WEIGHTED INDEX HITS NEW HIGHS. In spite of hitting new highs, the Nasdaq 100 index is outperforming the Nasdaq Equal Weighted index by about 17%.Chart source: StockCharts.com. For educational purposes.

It’s all about tech stocks. Technology has been the best-performing sector for the last year. If you look at sector performance for the past year, all 11 S&P sectors are green—yes, even Real Estate.

The bullish outlook is still in play from a bird’s eye perspective. Keep a close eye on the charts of the broader indexes. If they break below significant moving average support levels, objectively analyze your holdings to see if it makes sense to sell them.

It’s All About Interest Rate Cuts

According to the CME FedWatch tool, the probability of a September rate cut continues to increase, as does one of a second rate cut in December. The stock market has priced in these cuts even though Fed Chair Powell, in his recent testimony, didn’t indicate when rate cuts will start.

There’s still more data before the September meeting, so have your ChartLists within easy reach. For as long as investors are speculating rate cuts, the market will probably keep moving the way it has been. But when those rate cuts arrive, things may change. Consider watching the bond market, which can often be a leading indicator of when interest rate cuts will start.

The weekly chart of the iShares 20+ Year Treasury Bond ETF (TLT) below shows that bond prices haven’t made a decisive move yet. They will probably remain this way until the timing of rate cuts is crystal clear.

CHART 3. WEEKLY CHART OF TLT. Bond prices are still close to their five-year low. When the Fed cuts interest rates, TLT could see upside movement.Chart source: StockCharts.com. For educational purposes.

TLT is trading close to its five-year lows. If TLT remains above the blue-dashed trendline, investors speculate that interest rate hikes will probably happen. If TLT breaks below the trendline and declines, it would indicate that rate cuts aren’t on the table yet.

Closing Position

Yes, the stock market is getting toppy. The extended bull run has been mainly driven by rate cut anticipation. Enjoy the bullish stock market ride, but know when to jump off.

Charts to add to your ChartLists:

S&P 500 Equal Weighted Index ($SPXEW)

iShares 20+ Year Treasury Bond ETF (TLT)



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.

0
FacebookTwitterGoogle +Pinterest
previous post
Simple RSI Trend Strategy: Entry BEFORE a Breakout!
next post
Fed Chair Powell says holding rates high for too long could jeopardize economic growth

Related Posts

The Best Five Sectors, #22

June 10, 2025

From Hammer to Harami: Using StockCharts to Crack...

July 15, 2025

Joe Rabil’s Undercut & Rally Pattern: From DROP...

June 22, 2025

These Stocks are Just Beginning Their Move Higher!

September 14, 2024

Here’s Why The Bottom Is Dropping Out of...

January 12, 2025

Look Out Below! The Bear Case For Apple

March 23, 2024

What Happens When the S&P 500 Breaks Below...

May 24, 2025

RRG-Velocity Jumping on XLF Tail

August 24, 2024

VIX SPIKES! Is a Market Correction Coming?

July 19, 2024

Pre-Earnings Moves Are Underway And History Provides Us...

July 7, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest

    • The Real Drivers of This Market: AI, Semis & Robotics

      July 21, 2025
    • What Musk’s fracture with Trump means for GOP’s future: ‘Beating heart of the Republican Party’

      July 21, 2025
    • Trump’s housing chief rips Powell for blowing millions on Fed facelift during housing crisis he perpetuates

      July 21, 2025
    • Trump celebrates 6 months back in office: US ‘totally revived’ after being ‘DEAD’ under Biden

      July 21, 2025
    • Biden admin spent hefty sum of US tax dollars to upgrade embassy swimming pools in Iraq, Russia

      July 21, 2025
    • Trump heads to Scotland, continues ironing out trade deals after notching six months back in office

      July 21, 2025

    Categories

    • Business (1,299)
    • Politics (4,040)
    • Stocks (1,535)
    • Uncategorized (45)
    • World News (1,292)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: TheTraderHarbor, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 thetraderharbor.com | All Rights Reserved