🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

S&P 500: 7 Reversal Patterns Taking Hold Ahead of Key CPI Report

Published 09/04/2024, 07:50

It was a dull day for stocks, with the S&P 500 finishing the day slightly lower while rates rose and the US dollar sank. There isn’t much to take away from yesterday except that the VIX and the shorter duration measures of volatility were down, too. You rarely see the VIX down and the S&P 500 down on the same day, but that is what happened.

1. S&P 500 Traded Sideways Despite Lower Volatility

The index did nothing and traded sideways throughout the day, showing no ability to rise despite the move lower in implied volatility. This is not something we see very often, and it suggests the market could have been weaker if not for the move down in implied volatility.

S&P 500 Index Chart

2. NASDAQ 100 Remained Below the 10-day Exponential Average

The NASDAQ was equally boring, dropping by five bps and remaining below that 10-day exponential average. Since Thursday’s decline, we have seen the NASDAQ come up and test the lower right trendline of the diamond pattern two times, and both times, it has failed to close above that trend line.

However, if the pattern is correct and completed, I expect the NASDAQ to begin to fall more aggressively from this point forward. The longer it stalls out at its current level, the more likely the diamond pattern is incorrect.

NDX-Daily Chart

3. 2-Yr Rate Rises and Could Push to the 5% Level

The 2-year rate did break out yesterday, rising above 4.75% to close at 4.79%, which seems pretty clean. As mentioned over the weekend, if the 2-year has completed a cup and handle pattern, the move-up in the yield should continue from here and push back toward the 5% level in the coming weeks.US 2-Yr Bond Yield-Daily Chart

4. Copper Prices Jump

Copper prices jumped another 1% yesterday and managed to move past resistance at 4.29%, with the next level to watch coming around $4.40. It does appear to be getting a bit overbought currently, with the price moving above the upper Bollinger band and the RSI now at 76. So, copper prices could consolidate before the next leg higher starts.Copper Futures-Daily Chart

5. Inflation Impacted by Higher Copper Prices

The higher copper price seems to be impacting 5-year breakeven inflation rates, which is not surprising as the relationship has a long history. So, the higher copper goes, the less promising it is for the inflation outlook.US 5-Year Breakeven Inflation Index

6. Apple (AAPL) Stock Could Drop Given the Potential Double-Top Pattern.

Not a great look for Apple (NASDAQ:AAPL) here with a potential double-top, with the stock sitting on the neckline. I don’t think many people would have guessed that Apple would be down nearly 16% since the middle of December and the S&P 500 near an all-time high, but that is where it is currently.

The stock has given back all of the gains it saw off the October lows, and a break of support around $167 would probably set the stock up to drop another $31 to fall back to $136, given the potential double-top pattern.

Apple-Daily Chart

7. Nvidia Contending With Its Own Double-Top

That really shows just how important NVIDIA (NASDAQ:NVDA) has been to the index. Nvidia is currently contending with its own double top and a giant gap at $680 that needs to be filled at some point.NVDA-Daily Chart

Original Post


Are you investing in the stock market? To determine when and how to get in or out, try InvestingPro.

Take advantage HERE & NOW! Click HERE, choose the plan you want for 1 or 2 years, and take advantage of your DISCOUNTS.

Get from 10% to 50% by applying the code UK10. Don't wait any longer!

With it, you will get:

  • ProPicks: AI-managed portfolios of stocks with proven performance.
  • ProTips: digestible information to simplify a large amount of complex financial data into a few words.
  • Advanced Stock Finder: Search for the best stocks based on your expectations, taking into account hundreds of financial metrics.
  • Historical financial data for thousands of stocks: So that fundamental analysis professionals can delve into all the details themselves.
  • And many other services, not to mention those we plan to add in the near future.

Act fast and join the investment revolution - get your OFFER HERE!

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.