In this StockCharts TV video, Mary Ellen reviews the broader markets and highlights pockets of strength that are starting to trend higher. She also shares add-on plays to the move into home construction stocks, and shows key characteristics needed to confirm a downtrend reversal in select stocks.

This video originally premiered September 13, 2024. You can watch it on our dedicated page for Mary Ellen on StockCharts TV.

New videos from Mary Ellen 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.

While the S&P 500 finished the week once again testing new all-time highs around 5650, the Nasdaq 100 remains rangebound in a symmetrical triangle or “coil” pattern.  While this pattern does not necessarily suggest a potential next move for the QQQ, it did lead me to think about four different scenarios that could play out over the next six to eight weeks.

The chart of the QQQ looks a lot like the chart of Nvidia (NVDA), with a clear consolidation pattern of lower highs and higher lows. Other leading growth names like Meta Platforms (META) have failed to signal an upside breakout to give an “all clear” signal for the bulls. And defensive sectors continue to thrive, even though the S&P 500 finished in the green every day this week.

Today, we’ll lay out four potential outcomes for the Nasdaq 100. As I share each of these four future paths, I’ll describe the market conditions that would likely be involved, and I’ll also share my estimated probability for each scenario.

By the way, we conducted a similar exercise for the Nasdaq 100 back in June, and you won’t believe which scenario actually played out!

And remember, the point of this exercise is threefold:

1. Consider all four potential future paths for the index, think about what would cause each scenario to unfold in terms of the macro drivers, and review what signals/patterns/indicators would confirm the scenario.
2. Decide which scenario you feel is most likely, and why you think that’s the case. Don’t forget to drop me a comment on my channels and let me know your vote!
3. Think about how each of the four scenarios would impact your current portfolio. How would you manage risk in each case? How and when would you take action to adapt to this new reality?

Let’s start with the most optimistic scenario, with the QQQ achieving a new all-time high over the next six to eight weeks.

Option 1: The Very Bullish Scenario

What if NVDA breaks out to the upside, META finally pops above $550, and the rest of the Magnificent 7 stocks go right back to a leadership role? That would certainly drive the Nasdaq and the S&P 500 to their own new highs in the next month or so. If Powell’s press conference next week renews investor optimism and the market prices in a perfect soft landing for the economy, we could perhaps see this play out.

Dave’s Vote: 10%

Option 2: The Mildly Bullish Scenario

If the Mag7 names continue to struggle and fail to breakout, but other sectors like financials and industrials surge higher, we could get a more mildly bullish rally here. That would mean the QQQ remains below its 2024 high, but stockpickers rejoice as plenty of opportunities appear outside of the growth sectors.

Dave’s vote: 30%

Option 3: The Mildly Bearish Scenario

What if the Fed meeting does not go as well next week, and investors start thinking recession again? Defensive sectors have certainly been showing strength in recent months, and it feels like it would not take much to reverse the signs of optimism I’ve observed over the last week. Bonds outperform stocks as investors get defensive, and suddenly we’re all hoping for an October rally to overcome the bearish sentiment.

Dave’s vote: 45%

Option 4: The Super Bearish Scenario

You always need a doomsday scenario, and this last option would involve a big time “risk off” move for stocks. Growth stocks rotate lower, and risk-off plays like gold shine brightest as the QQQ retests the August low around $425. Perhaps Powell fails to boost investors’ confidence and the “goldilocks scenario” for the economy seems like a distant memory.

Dave’s vote: 15%

What probabilities would you assign to each of these four scenarios? Check out the video below, and then drop a comment with which scenario you select and why!

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.

This week’s stock market action may have caught many investors by surprise. After last week’s massive selloff, this week’s turnaround reignited investor enthusiasm in equities. Large-cap growth stocks were the leading asset class in the early part of the trading week, and, by Friday, the clear leaders were the mid- and large-cap stocks.

This week’s Consumer Price Index (CPI) and Producer Price Index (PPI) showed that inflation has cooled, which means the Fed will probably cut interest rates. More optimistic is the thinking that there may be more than the 25 basis points (bps) we were expecting last week.

Broader Market Index Price Action

The Dow Jones Industrial Average ($INDU), S&P 500 ($SPX), and Nasdaq Composite ($COMPQ) closed higher for the week. The S&P 500 and the Dow are trading close to their August highs, but the Nasdaq has some catching up to do. In Nasdaq’s defense, it was the hardest hit among the three.

The Nasdaq’s daily chart gives a clearer picture of where the index stands now, technically speaking, battling against resistance from the downtrend line. A break above this line would mean the bulls are still in the lead, but a break above the August high would indicate bulls are charging to the finish line.

FIGURE 1. WILL THE NASDAQ COMPOSITE BREAK THROUGH ITS DOWNTREND? A break above the downtrend would be bullish for the tech-heavy index, but a more confirming move would be a break above its August high.Chart source: StockCharts.com. For educational purposes.

If you participated in the “dip buying” this week, the resistance of the downward trendline is one to watch carefully. And if you missed buying on the September dip, a break above the trendline should be an early signal to prepare to add positions, but waiting for the index to break above its August high would be wiser.

There are a couple of factors to keep in mind. One is that it’s still September, a seasonally weak month for stocks. The second is there’s an FOMC meeting next week. Investors expect an interest rate cut to be announced, but how much will the Fed cut rates? The odds of a 50 basis point cut have risen since last week; as of this writing, according to the CME FedWatch Tool, the probability of a 25 bps cut is 51%. The probability of a 50 bps is 49%. These percentages drastically differ from last week’s odds, when the odds for a 25 bps rate cut were above 70%.

The stock market is acting like it expects a 50 bps cut. If the Fed cuts 25 bps, though, the market could be disappointed, so tread carefully. A lot is riding on the Fed’s decision on Wednesday.

Small Cap Revival

The S&P Small Cap Index ($SML) started gaining traction this week, surging on Friday. Looking at the ratio chart of the iShares Russell 2000 ETF (IWM) and SPDR S&P 500 ETF (SPY), we can see small-cap stocks are beginning to gain strength, but still have some work to do before outpacing the bigger stocks.

FIGURE 2. SMALL CAPS VS. LARGE CAP STOCKS. Small caps surged this week, but they still have more to go before catching up with their bigger cousins.Chart source: StockCharts.com. For educational purposes.

Small caps surged in July when inflation fears were in the rear-view mirror, but fell after concerns of a recession surfaced. Now that interest rate cuts are on the table, small-cap stocks may see more upside. A break above the upward-sloping 50-day simple moving average (SMA) could give IWM a further boost.

What’s Happening With Precious Metals?

Gold prices hit an all-time high on Friday, riding on interest rate cut expectations. The daily chart of the SPDR Gold Shares (GLD) below shows price breaking above a consolidation area, gapping up, and hitting an all-time high.

FIGURE 3. GOLD PRICES HIT AN ALL-TIME HIGH. After breaking out of a consolidation pattern, gold prices gapped up and surged.Chart source: StockCharts.com. For educational purposes. Why the rise in gold in tandem with a rise in equities? Investors want to hedge their positions in case the Fed makes a surprise move.

Silver prices also moved higher, as seen in the chart of the iShares Silver Trust ETF (SLV). A break above the downward-sloping trendline and Friday’s large gap up are positive for silver traders. If silver prices continue to rise, the series of lower highs could be behind the white metal—for a while, anyway.

FIGURE 4. SILVER SURGES. SLV breaks above its downward-sloping trendline. Whether this upward move will continue rests on how much the Fed cuts rates in next week’s FOMC meeting.Chart source: StockCharts.com. For educational purposes.

The only known market-moving event next week is—you guessed it—the FOMC meeting. Expectations of a 50 bps cut are rising. How much will the Fed cut? We’ll know soon.

End-of-Week Wrap-Up

• S&P 500 closed up 4.02% for the week, at 5626.02, Dow Jones Industrial Average up 2.60% for the week at 41,393.78; Nasdaq Composite closed up 5.95% for the week at 17683.98
• $VIX down 26.01% for the week, closing at 15.56
• Best performing sector for the week: Technology
• Worst performing sector for the week: Energy
• Top 5 Large Cap SCTR stocks: Insmed Inc. (INSM); FTAI Aviation Ltd. (FTAI); Applovin Corp (APP); Cava Group (CAVA); SharkNinja, Inc. (SN)

On the Radar Next Week

• August Retail Sales
• August Housing Starts
• Fed Interest Rate Decision
• FOMC Economic Projections
• August Existing Home Sales

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.

Tech Rallies But Remains Inside the Lagging Quadrant

A quick look at the Relative Rotation Graph for US sectors reveals that the Technology sector is still the main driving force for the market. The technology sector now makes up more than 30% of the market capitalization of the S&P 500, so it significantly influences the price (movement) of the S&P 500 index.

On this weekly RRG above, the XLK tail is seen heading further into the lagging quadrant, together with XLC and XLE.

After dipping to the 540 area at the end of last week, the market has recovered some of that ground so far this week. This move has now established the area around 540 as support, while overhead resistance still remains intact around 565. A break of either level will very likely ignite an acceleration in the direction of the break.

On the weekly RRG, this move has had no material impact so far.

The Daily RRG Shows Some Improvement

Only when zooming in on the daily Relative Rotation Graph shows this week’s improvement.

What is interesting to see on this daily RRG is that the same three sectors that are inside the lagging quadrant on the weekly RRG are also inside the lagging quadrant on this daily RRG. XLC and XLE clearly confirm their relative downtrends by rotating at a negative RRG-Heading.

The uptick in tech stocks so far this week has only caused an improvement in relative momentum but not (yet) in relative strength.

But Its Based On a Narrow Foundation

Zooming in on the technology sector members and using the table below to examine their performance over the last five trading days, the RRG provides some insight into where this jump in performance is coming from.

With XLK up 5% so far this week, only 9 out of the 50 stocks in this group outperform SPY. The other 41 are below XLK. With NVDA being one of the top-ranking stocks, this group is already pulling performance up by its market capitalization, especially because MSFT, the other big name inside XLK, is only 0.5% below XLK.

Therefore, the foundation of this tech rally so far is very narrow…again.

Based on these observations, I will judge the current tech rally as a

Recovery within an established relative downtrend.

Defensives Pushing Into Leading RRG Quadrant

On the opposite side of the spectrum, three sectors seem very well positioned for further outperformance.

XLV (Health Care), XLF (Financials), and XLP (Consumer Staples) have all just entered the leading quadrant, which means a turnover from a relative downtrend into a relative uptrend against SPY. All three are rotating at a positive RRG-Heading, and all three are showing an increasing RRG-Velocity.

Looking at their individual charts combined with relative strength and their RRG-Lines, one sector stands out with a setup we have seen before.

Consumer Staples

At the end of 2021, the consumer staples sector ended a prolonged period of underperformance (20 months), marked by the first vertical dashed line in November 2021, when the RS-Line broke above a falling resistance line. By then, the JdK RS-Momentum line had already crossed above the 100 level, pushing the XLP tail into the improving quadrant.

A few weeks later, the JdK RS-Ratio line also crosses above 100, and the tail moves into leading. Shortly after that move, the market started to drop, and XLP started to serve its role as a defensive sector, outperforming SPY for more than a year while the market (SPY) dropped 20%.

Fast forward to the present.

The RS-line of XLP has broken above its falling resistance after a downtrend that started at the end of 2022, so almost two years ago, 21 months to be exact. RS-Momentum rose above 100 a few weeks after that event, and this week, RS-Ratio also crossed above 100, pushing the XLP tail into the leading quadrant.

The price moves on the SPY chart are almost identical on both occasions. There is a peak when the RS line crosses upward and a second peak shortly after the RS-ratio line crosses above 100.

Given the defensive nature of the Staples sector and the analogy that seems to be playing out at the moment, I am keeping my cautious/careful approach to the markets.

RISK > POTENTIAL REWARD

#StayAlert, –Julius

It was a massive turnaround day in the market on Wednesday—stocks sold off after the Consumer Price Index (CPI) data was released, but, after a couple of hours, rallied back to make up the losses and continue higher. The broader stock market indexes closed higher. The Nasdaq Composite ($COMPQ), S&P 500 ($SPX), and Dow Jones Industrial Average ($INDU) had a very wide range day, with the Nasdaq ahead of the pack closing higher by 2.17%.

On Wednesday, the Tech sector was the top performer, followed by Consumer Discretionary and Communication Services. The underperforming sectors were Energy, Consumer Staples, and Financials.

FIGURE 1. WEDNESDAY, SEPT. 11, MARKETCARPET. Tech stocks made a comeback today. Are investors rotating back to mega-cap tech stocks?Image source: StockCharts.com. For educational purposes.

Financials Pull Back

Financials are losing steam after their big run. Investors were stoked about this sector since interest rate cuts were a possibility. But there has been a sell-off in financial stocks, and yesterday’s largely negative comments from JP Morgan Chase (JPM), Goldman Sachs (GS), and Ally Financial (ALLY) worsened the situation. This spilled over into Wednesday morning’s trading. The Financial Select Sector SPDR Fund (XLF) fell to a low of $43.38, but, similar to the broader market indexes, it recovered and closed at $44.28. The sentiment shift isn’t obvious in XLF, but I will watch the chart closely because buying pressure could come back.

FIGURE 2. A PULLBACK IN FINANCIALS. Negative comments from banks hurt the Financial sector, but XLF recovered after a selloff. Will it maintain its uptrend?Chart source: StockCharts.com. For educational purposes.

Technically, XLF’s chart doesn’t look terrible, but it’s not as great as it once was. XLF almost hit its 50-day simple moving average (SMA), bounced back, and closed at its 21-day EMA. It could continue to be shaky for some time.

The relative strength index (RSI) is at 51.76, but is declining. XLF could go either way here. The positive for the ETF is that interest rates will come down this year, which could boost financial stocks.

Financial stocks aside, could Wednesday’s move confirm a shift toward bullish sentiment?

The Broader Markets

The daily chart of the S&P 500 shows that the index closed above its 21-day EMA and market breadth conditions are improving. The percentage of S&P 500 stocks above their 50-day moving average is at 66.60 and the Advance-Decline Line is maintaining its uptrend.

FIGURE 3: TURNAROUND IN S&P 500. After selling off in the first few hours of the trading day, the S&P 500 recovered all its losses and continued to rise, ending with a strong finish.Chart source: StockCharts.com. For educational purposes.

The StockCharts Market Factors widget (in your Dashboard data panels) shows that large-cap growth and momentum stocks were up the most today. In yesterday’s post, I discussed the SPDR S&P 500 Growth ETF (SPYG) and would like to revisit the chart.

FIGURE 4. SPYG MADE A SIGNIFICANT UPSIDE MOVE. The ETF still has to break above the upper trendline to confirm an upside move. Momentum is picking up, and an uptrend could resume if it continues.Chart source: StockCharts.com. For educational purposes.

Wednesday’s significant upward move indicates that sentiment is shifting toward large-cap growth stocks. If the momentum continues, SPGY could break above the upper trendline. The RSI is also trending higher. Right now, the technical picture looks positive for large-cap growth stocks.

Closing Bell

This week, more macroeconomic data, including the Producer Price Index (PPI) and Michigan Consumer Sentiment, will be released. Will they move the needle in the opposite direction? That’s something to watch for in the next couple of days.

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.

In this exclusive StockCharts TV video, Joe discusses why he is a bottom-up technical analyst. He explains the difference between top-down and bottom-up analysis and uses this to show the strongest sectors rotating to the upside right now; this approach will help give advance notice of which areas to focus on before they become obvious to the masses. He also discusses market volatility and why it is looking rather concerning. Finally, he goes through the symbol requests that came through this week, including META, TSLA, and more.

This video was originally published on September 11, 2024. Click this link to watch on StockCharts TV.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

In this video from StockCharts TV, Julius takes a look at rotations in an asset allocation RRG. He compares fixed-income-related asset classes, commodities, the US dollar, Bitcoin and stocks to a balanced portfolio of 60% stocks/40% bonds. The long-lasting outperformance of stocks seems to be coming to an end.

This assessment of asset allocation is then followed by a look at S&P 500 sector rotation using Relative Rotation Graphs broken down into three groups — offensive, defensive, and (economically) sensitive. The current rotation in the defensive group is really standing out.

This video was originally published on September 10, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past episodes of Julius’ shows can be found here.

#StayAlert, -Julius

The Real Estate sector took the lead in Tuesday’s trading, probably because interest rate cuts are approaching. Technology and Consumer Discretionary took second and third place, respectively.

Overall, it was a pretty quiet trading day except for the energy sector, which showed the biggest decline. The Energy Select Sector SPDR Fund (XLE), the StockCharts proxy for the Energy sector, declined 1.75%.

FIGURE 1. SEPTEMBER 10, 2024 MARKETCARPET. Real Estate was the leading sector, followed by Technology and Consumer Discretionary. Energy was the laggard.Image source: StockCharts.com. For educational purposes.

It looks like investors are slowly rotating back into large-cap growth stocks just in case the asset class quickly trends higher. At the same time, investors aren’t losing sight of the FOMC September 18 meeting, in which the Fed is expected to cut interest rates by at least 25 basis points. A rate cut would favor the Real Estate sector, since lower interest rates encourage borrowing, which could increase real estate sales.

Real Estate Pushes Higher

The Real Estate Select Sector SPDR Fund (XLRE) chart below shows that the ETF set a new two-year high on Tuesday.

FIGURE 2. CHART OF REAL ESTATE SELECT SECTOR SPDR FUND (XLRE). The ETF is trading above its 50-day moving average, with a SCTR score of 99.2 and relative performance against the S&P 500 edging higher.Chart source: StockCharts.com. For educational purposes.

XLRE is trading above its 20-day simple moving average (SMA), and the StockCharts Technical Rank (SCTR) score is at 99.2. XLRE’s relative performance against the S&P 500 ($SPX) is at 2.09%, which is slightly higher than the large-cap index, but there is potential for it to rise further.

CPI and Large-Cap Growth Stocks

The August CPI data is expected to rise 2.6% year-over-year and core CPI is expected to rise 3.2%. Investors will closely watch the data when it’s released Wednesday morning before the open. The CPI will give insight into how much of an interest rate cut to expect at the FOMC meeting, which could cause some waves in tomorrow’s trading. We could see a switcheroo in tomorrow’s MarketCarpet or a continuation of the same, with more buying pressure in the large-cap growth stocks. 

Looking at the Market Factors widget in one of the Dashboard panels, the large-cap growth factor was Tuesday’s top gainer, with a 0.48% rise.

The StockCharts proxy for this market factor is the SPDR S&P 500 Growth ETF (SPYG). This fund’s top holdings include all Mag 7 stocks.

The chart of SPYG is similar to the charts of the Nasdaq Composite ($COMPQ), Nasdaq 100 ($NDX), and Invesco QQQ Trust (QQQ). There’s a little upside movement, but not enough to convincingly suggest a momentum shift.

FIGURE 3. DAILY CHART OF SPDR S&P 500 GROWTH ETF. SPYG is trading in the middle of its July high-to-August low range, which means the ETF has an equal chance of moving in either direction. The RSI needs to move above 50 with above-average volume.Chart source: StockCharts.com. For educational purposes.

There still needs to be much more bullish pressure to move Tech stocks higher. The relative strength index (RSI) should cross over the 50 level with increasing volume. SPYG is trading in the middle of the July high-to-August low range and could move in either direction. A break below the lower blue dashed line could start a bearish move, whereas a break above the upper trendline would be bullish.

Hopefully, we won’t have to wait too long to know whether it’ll be the bulls or bears who dominate the large cap growth stock arena. Tomorrow will present a clearer picture of which way investors are rotating their holdings. 

As a side note, Extended Factors is one of the latest additions to the SharpCharts dashboard panels. These are very useful for identifying which market factors are leading and lagging.

Energy Slump

Oil prices have slid lower recently and have now reached their lowest level in more than two years. The fall in price is related to weaker demand and concerns about China’s economic growth. The chart of the Energy Select Sector SPDR Fund (XLE) shows the magnitude of the fall in energy prices. XLE is trading below its 200-day simple moving average, and the Energy Sector Bullish Percent Index ($BPENER) crossed below 30.

FIGURE 4. THE ENERGY SECTOR’S SLIDE. The Energy Select Sector SPDR Fund (XLE) is trading below its 100-day moving average, and its Bullish Percent Index is below 30. Technically, XLE looks very bearish. Chart source: StockCharts.com. For educational purposes.

Closing Bell

There wasn’t much movement in equities today. Tomorrow could be a different story, with CPI data tomorrow morning before the close. There could be a lot of choppiness in early trading hours.

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.

Perhaps no other industry in the world is more synonymous with risk and emergent (R&D) developments like biotechnology. While the information technology sector has been a dominant driver on Wall Street since the big tech revolution in the 2000s, biotech, a subset of the healthcare sector, took a sharp nosedive during the pandemic in 2020.

By 2020, 80% of all biotech companies were losing money. Near-zero interest rates made it easy for biotech companies to continue raising capital to fund their operations. But as the Fed began raising interest rates a few years later to combat rising inflation, the capital lifeline was cut, and the biotech industry cratered.

But now, with Fed rate cuts on the horizon, Wall Street may be eying this beaten-down industry, currently trading with bargain basement valuations. Does this present an opportunity for a long trade?

Biotech vs. the Broader Healthcare Sector

Let’s look at biotech starting at its 2020 top and compare it to the broader healthcare sector. We’ll use the following industry and sector proxies:

• SPDR S&P Biotech ETF (XBI) for our biotech industry proxy
• Health Care Select Sector SPDR Fund (XLV) for our sector proxy

Go to your StockCharts Dashboard and open up PerfCharts. Type in XBI,XLV and drag the bottom timeline slider to around 932 days. It should look like this:

CHART 1. PERFCHART OF XBI AND XLV. The chart starts when XBI hit a top in 2020.Chart source: StockCharts.com. For educational purposes.

To get an idea of relative performance, this shows you just how much the biotech proxy has been underperforming healthcare over the last three years.

With that knowledge, what’s going on today with regard to biotech relative to its sector? Why not get a quick glance at the Advancers & Decliners?

In one of the data panels on your StockCharts dashboard, select the More button and click Advancers & Decliners > US Sectors. On Tuesday (mid-day), this is what I saw:

CHART 2. ADVANCERS & DECLINERS BY SECTOR. Notice that the number of advancing and declining stocks are neck-and-neck.Image source: StockCharts.com. For educational purposes.

This tells me something about healthcare as a sector—namely, that the number of stocks going up and down is nearly the same. But it doesn’t tell me much about biotech as an industry.

So, let’s check the StockCharts Sector Summary and drill down.

Open the page and click on XLV. You should see each individual industry. Let’s select a three-month look-back to get a bigger picture of industry performance. This is what I got:

CHART 3. 3-MONTH INDUSTRY VIEW ON STOCKCHARTS’ SECTOR SUMMARY. Biotech rising?Image source: StockCharts.com. For educational purposes.

This tells you that, over the last quarter, biotech’s market performance has been second only to healthcare providers. But take a look at the volume. It has the highest volume of trades in the entire sector. Could this mean that Wall Street is steadily accumulating biotech stocks, fueling its rise to date? If so, is biotech on the verge of an upside trend reversal?

 Let’s look at a daily chart of XBI to see what the price action says.

CHART 4. DAILY CHART OF XBI. There’s a very wide ascending triangle formation in the price chart; the stochastic oscillator is starting to turn higher above the 20 level, and On Balance Volume is trending higher.Chart source: StockCharts.com. For educational purposes.

Here are the main points to watch:

• XBI has been trending upward since late April, and it’s about to challenge the $103 range (see blue dotted line) marking the March 2023 high and this year’s July and August highs, forming a long ascending triangle pattern which leans on the bullish side.
• Price appears to be bouncing off the stochastic oscillator’s 20 line (see orange circle), just above oversold territory.
• The On Balance Volume (OBV) indicator, whose founding principle is “volume precedes price,” shows that buying pressure is on a steady uptrend, mirroring XBI’s price action.

For XBI’s uptrend to remain valid and to see if Wall Street capital begins flowing into biotech ahead of the anticipated Fed rate cuts, XBI will have to break through resistance at the $103 range while staying above the current trend line (see solid blue trendline) or the last major swing low at $91.

At the Close

Here’s the takeaway: Biotech has had it rough since its 2020 peak, but there could be some light at the end of the tunnel. With Fed rate cuts on the horizon, Wall Street might be eyeing this beaten-down industry for a rebound. Keep an eye on the technical levels to spot any hint of major market moves before the rest of the crowd catches on.

Last but not least, be sure to save XBI in one of your StockCharts ChartLists.

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.