Major market indexes spent the latter part of the week moving tight sideways as they consolidated the initial rally following last weekend's unfolding of a U.S.-China trade war de-escalation. The NASDAQ Composite shows tight price action over the last three days with volume declining as the index posted a higher high on Friday on lighter volume. Overall, the indexes continue to rally within well-defined ascending wedge formations.
The rally may come under some pressure on Monday when trade resumes. On Friday, credit rating agency Moody's Corp. lowered the U.S. credit rating to AA1 from AAA. This comes long after Standard & Poor’s (S&P) downgraded the U.S. from AAA to AA+ on August 5, 2011, citing concerns over rising deficits and political gridlock, and nearly two years after Fitch Ratings downgraded the U.S. from AAA to AA+ on August 1, 2023. A final nail in the coffin, or another ratings agency tardily telling us what we already know?
Tech stocks have led the rally, but most have now reached levels of substantial upside extension. Apple (AAPL), Amazon.com (AMZN), Meta Platforms (META), Microsoft (MSFT), and Nvidia (NVDA).
Bitcoin ($BTCUSD) is now basing just below its prior highs as it trends along the rising 10-dma. We would expect some overhead resistance to potentially come into play, resulting in the formation of a handle area if the resolution is constructive.
As $BTCUSD has continued to rally, crypto miners that we reported on a few weeks ago as they started to post bottom-fishing pocket pivots, CleanSpark (CLSK), IREN Ltd. (IREN), and Marathon Digital Holdings (MARA), have all gathered strong upside momentum over the past week after spending some time stuck in neutral. Now they are all streaking towards 200-dma resistance where they will encounter their next test. Thus far, they have been up to the task, although the road has been a rocky one.
Gold is now testing 50-dma support, which we view as logical given the prior parabolic upside move that took COMEX Gold Futures to an all-time high of $3,509.20/oz. Technically, this is a potential long entry point using the 50-day line as a selling guide. On Friday, Moody's lowered the U.S. credit rating to AA1 from AAA, which could put the spotlight back on alternative currencies like $BTCUSD and gold.
On Friday we reported on big-stock gold miner Newmont Corp. (NEM) as it pulled into the top of its prior base from which it broke out in early April. It ended the day just above the 50-dma so posted a moving average U&R at the 50-day line which can be used as a tight selling guide.
Silver is interesting, however, as it has lagged gold primarily because the market views it more as an industrial metal than a monetary metal, at least in the current environment. Thus, the prospect of tariff-driven economic chaos was not bullish for the white metal, which sold off hard after Trump's Liberation Day hefty smorgasbord of tariff announcements. It has since recovered, and as we reported early on Friday the iShares Silver Trust (SLV) posted a price U&R along the prior 29.04 low after printing a 28.99 low in the pre-open session on Friday. That was an actionable long entry using the prior 29.04 low as a selling guide.
FormFactor (FORM) and Rigetti (RGTI) are both quantum-computing related names that we reported on Wednesday. FORM was best bought along 50-dma support the prior week but Monday's gap-up pocket pivot could set up another entry as the stock pulls into 10-dma support, so this can be watched for. RGTI posted a big-volume pocket pivot on Wednesday off the 10-dma. We would look for any pullbacks into the 10-day line as potentially lower-risk entries from here.
Aluminum Century Aluminum (CENX), Ero Copper (ERO) and Freeport-McMoRan (FCX), and steels Nucor (NUE) and Steel Dynamics (STLD) were all reported on Wednesday but have all moved lower. In the process, some of these may be coming into more opportunistic entry positions. For example, ERO and FCX held support at their 20-demas where entries are possible using the 20-day lines as selling guides. STLD pulled into 10-dma support on Friday where it shook out and posted an MAU&R at the 10-day line. Both CENX and NUE closed below their 10-dma and 20-dema, but can be watched for any moves that retake the moving averages, resulting in potential MAU&R long entries.If the general market rally is to continue, we would expect that it would broaden beyond the current tech-centric focus, which could bring other areas like commodities, including industrial metals, into focus.
The Market Direction Model (MDM) remains on a BUY signal.