SPY: The markets continue to climb the "Wall of Worry" trading to new all time highs in a significant manner. The SPY tagged our recent target of 3500 after breaking out over February's highs. It continues to hold the rising bottom's line and if it should reach the top of the longer term channel, 3800 is the target. Surprisingly, though, the indicators remain neutral showing no signs of being over bought. Look for markets to only strengthen from here in.
NDX: The NDX is even stronger than the SPY with the major FANG stocks all trading to new all time highs with strong momentum. It is mid channel of a tight rising channel. There is nothing to indicate this move is topping at all. Look for NDX to trade to 12,600.
DOW: The DOW tagged our 28500 target and also continues higher in a rising channel. Look for the DOW to trade to new all time highs over 29,568.
DJ Transportation: Trannies continue to surge reaching key resistance on Friday at 11322. A break over that level and it will be through an area of major resistance. More importantly though, it is approaching all time highs at 11612. If Trannies trade through that level it will be a major buy signal according to Dow Theory. These types of signals are few and far between and closely watched by major market participants. If the Trannies continue their thrust in the rising channel, I wouldn't be surprised to see the index transverse into new highs before the end of September.
IWM: The broader index is lagging the big names consolidating since June. But now, it is finding support around $155 holding the rising channel line. Look for the broader market to finally get the rising momentum of the major indices and to trade to new all time highs of $173. Key levels before that are $169 and $171 that it needs to get through. But I don't think the broader market can with stand the upward pressure and will, at worst, get dragged along to new highs. In the alternative, we may see a rotation out of the big names as profit taking sets in and a move of the money to mid cap and small cap names with an ensuing acceleration of these stocks.
FAS: The financial sector, which has been a laggard, seems to be picking up steam here. It is in a rising channel and has broken out to the upside of a large wedge pattern. Look for the ETF to trade to $44.75 and $52.85 over the coming month as the sector comes back into vogue.
LABU: The biotech ETF is bucking the rising trend. The sector is under a lot of selling pressure. The ETF remains in a descending channel failing to hold key support. Look for LABU to trade down to $45 and maybe $40. The only saving grace may be that it gets dragged along with the rest of the rising market. But for now, the chart is bearish.
SMH: Conversely, the semiconductor sector is one of the strongest sectors and the ETF continues to make new all time highs. It is in a massive rising channel making a significant move over the previous pre-covid highs. $180 and $185 are next targets for this ETF.
Oil: The price of oil remains relatively strong, trading over $40/bbl. With the strength of the Transportation index, we should see oil continue, at least, to trade in the $40 range. As such, I would expect oil stocks (GUSH is the ETF we follow) to continue to strengthen. It is consolidating over the last 2 months in a range between $30 and $40. With the strong thrust of the markets, I would expect oil stocks to start to catch up and trade higher. Look for GUSH to trade to $48.50 and then $67.
Gold: The US Government is devaluing its currency by adding trillions of dollars to money supply. They have also indicated that they will relax their strict 2% limit for inflation. It is not surprising (and not suggesting the policy is right or wrong) that they will let inflation run. With such a huge debt on their balance sheet now, inflation will help to pay off the Covid spending. Most interest payments are fixed in nominal terms, so inflation makes existing debt less important in real terms. For example, inflation reduced the 1946 Federal debt/GDP ratio by almost 40% within a decade. A decade of 4% inflation today would do the same for total debt, not just government debt. As such, there will be a move by investors from paper currency to hard assets to try to retain value. Look for gold to at least stay in the trading range our $2000. More likely, we will see gold trade to $2200 and $2400.
Technical Indicators: 71% of stocks are now above their 40 day moving average. This is an improvement over the past few months when the indicator was down near 30%. It is reading slightly over bought but when seen in conjunction with the McClellan Oscillator and VIX, the reading remains neutral. The McClellan Oscillator closed at 1 on Friday. Considering the big names are all making new highs, we are not getting a broad participation in the market. But, that will change over the next 30 days as the broader market catches up with the big names. Look for VIX to trade under 20 and the oscillator to reach the 150 level as the broader markets trade into new all time highs.
About the Author: Robert Knight, MBA, is the founder and Day Trader Moderator at TurboTrading.biz, an educational service for traders of all levels. He has been in the markets for over 30 years from investing in and trading the markets to running public companies. This trading and corporate experience, accompanied by his MBA, gives him deep insight into how markets function and how traders think. As well in those 30 years, he has experienced both bull and bear markets, trading every hot sector in their heyday (precious metals, oil, dot.com, OTC pumps, biotech, block chain) so is well versed in long and short with no specific preference other than a bias towards the market trend. His in depth knowledge on a variety of topics such as chart patterns, economic cycles, and sector trading make his videos and webinars insightful, but easy to understand. As well, Bob was the author of countless SEC documents prepared for public companies and can guide subscribers through their intricacies to garner essential information in a quick and easy manner. Learn more about TurboTrading and get a Free Trial.