ETHE - Expecting A Tradable Near-Term Bottom In Equity Markets (Technical Analysis)

2023-09-29 10:57:54 ET

Summary

• Looking at the technical charts across various asset classes, I believe we are likely to see a tradable near-term bottom in the equity markets.
• Charts in US equities, international equities, FX and precious metals are providing bullish tells, and are finding support at pivotal levels.
• I am expecting a 2-3% bounce in the QQQ at least, with META leading the way.

I believe there are sufficient tells to show that markets are likely to put in a near-term rebound.

For one, the percentage of stocks within the Nasdaq 100 ( QQQ ) that are above their 50-day moving average stands at 25%. This is the lowest reading we have had in 2023, and is getting close to the September 2022 bottom.

While broad-based weakness does not equate to an imminent rebound, it still raises the probability of a near-term bottom that is tradable.

Percentage of stocks in Nasdaq 100 above 50-day moving average

Next, the USD is losing steam this week, and looks on course to put in a bearish reversal candle on the weekly chart. While the week has not ended yet, the fact is the USD has lost more than 75% of the week's gains, and it looks like it is near-term exhausted.

Weekly Chart: Dollar Index

The Nasdaq 100 ((QQQ)) is also rebounded at an area where there is a confluence of supports, from uptrend line since the start of 2023, and the August swing low.

Daily Chart: QQQ

Risk proxies are also acting well, which is a positive sign for risk sentiment. After weeks of flirting with breaking below its key $1630 pivot, Ethereum ( ETHE ) has pushed higher to aggressively reclaim ground above the pivot.

Daily Chart: Ethereum

FX risk proxies like the New Zealand Dollar are also acting well. The NZD broke down briefly against the USD, but has spent the last few weeks curling up resiliently. Now, NZD/USD has broken back above the key 0.60 pivot.

Weekly Chart: NZD/USD

Silver ( SLV ), which has been under the onslaught of a strong USD and rising bond yields, has also pushed higher from support.

Daily Chart: SLV

International equities, such as the China A50 ( ASHR ) has also defended its key support very well, averting a breakdown.

Daily Chart: China A50

Semicons ( SMH ) broke down briefly below its key $144 pivot, but has not followed through lower. Instead, it has broken back above this pivot, and I am watching for follow-through higher to really cement the near-term bottom.

Daily Chart: SMH

Personally, I dipped my toes in the equity market on Thursday, taking a long position in Meta Platforms ( META ). This stock looks the strongest out of the mega-cap technology space, as it is trading above its key moving averages (10, 20, 50, 200 period) on the daily chart. I bought it at $301.38 and added on at $304.14. My stop loss is at $294.98, just below Thursday's low.

Daily Chart: META

Overall, I look for clues and tells across various asset classes to get a technical picture of where the market wants to go.

There are sufficient tells right now that raise the probability of the equity markets putting in a near-term tradable bottom. While I am not expecting new all-time highs in the S&P 500 ( SPY ) and Nasdaq 100 right away, I think a 2-3% bounce is likely, and I will assess the price action along the way.

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