It has been a wild week in the markets with DIA, RSP and IWM ripping higher while SPY and QQQ sold off on tech weakness. The number of S&P 500 stocks above their 200DSMA, S5TH, hit 80%, which is as high as it’s been since early 2021. The 80% level was a strong resistance from 2016-2020 and has been a strong resistance since 2021 because it takes some serious bullish sentiment to push past 80%. Thursday’s price action was mostly bearish with very few patches of green to be seen as stocks careened lower.

SPY

Tech has been a crowded trade for quite some time and tech, big tech and semiconductors specifically, have been the main drivers of the markets going higher in 2024. This pullback is health and very much needed. We took large profits into the $500.00 area on QQQ in our RLT Newsletter’s Prosperity Portfolio and Jerremy Newsome went entirely to cash! With cash on hand, these dips look buyable on a lot of great names. If the QQQ and SPY can fill their gaps from June 11th, that will make risk reward into a new high pretty appealing. Another ETF that looks very intriguing is VanEck Semiconductor ETF (SMH). We track SMH regularly because the semiconductors a such a critical part of this market.  If SMH can get down to the 100DSMA it should have great risk reward for a move higher into new all-time highs.

The reason we like SMH is because it simplifies the semiconductor trade. There are a lot of semiconductors that look ready for a move higher into the fall after they fall a little more into the summer. SMH holds 26 names and is weighted heavily into its top three which are, NVDA at 19%, TSM at 13% and AVGO 7.75%. Some of its other top stocks include AMD, ASML, AMAT, LRCX, QCOM, and MU. All of which are setting up nicely for a pullback and another run at the highs. Obviously, a trader could simply pick a few of their favorite names in the semiconductor space but SMH gives broad exposure to the industry and spreads the risk around.

SMH

NVDA is a critical semiconductor name and what it does affects the whole market and of course SMH. NVDA has pulled back 17% from its highs and formed a bearish hammer candle on Thursday. Thursday's lower wick could certainly mark the bottom of NVDA, but one final push lower would really fill out the C wave of the pattern. The prior two pullbacks on NVDA have been 22% and if this one follows the same trajectory, this correction will end around $109.00. If Thursday's low on NVDA is all we get as far as a sell off, it would be a very similar pattern to the Bitcoin correction, just on a smaller scale.

NVDA

Bitcoin reached its all-time high 128 days ago and has been in a correction ever since. From an Elliot Wave perspective, it has been a very standard correction called a regular flat. The B wave made a lower high and the C wave made a lower low. The C wave making a lower low was a beautiful trap below the May 1st low and had the added benefit of a beautiful hammer candle and RSI divergence. Bitcoin is coming to the end of its post halving consolidation phase as it has been 90 days since the halving. It is right around this time when things have started to get fun in the past and if history is going to repeat itself, bitcoin should be stretching and getting ready to run pretty soon.

BTCUSD