Hold the Line
RLT Newsletter
The strength of this market is very clear, and Wednesday and Thursday once again reinforced that. The key support level I have been watching, the May 12th low at $731 on SPY, never broke. Because of that, there really has not been much reason to get overly bearish outside of short-term day trades. As long as that level continues holding, this market absolutely has the ability to keep pushing higher.
The 2024 Analog & Key Levels
This recent 2.3% dip was almost identical in size to the January 2024 pullback before the market resumed its vertical rally higher. During that run, SPY went on to gain another 12%, bringing the total move to roughly 28%. A similar move from here would project SPY up toward $800 and into the upper trend line that this entire bull market since 2009 has respected.
I am not saying that has to happen here, but if the only resistance we find at this major Fibonacci extension level is a three-day dip before a breakout higher, and especially if that breakout comes with strong volume, then that bullish scenario has to become the default expectation. Until $731 breaks, I am assuming it is still full steam ahead.
SPY Daily Chart
Trillion Dollar Titans
If this market is going to continue vertically higher, a few things need to happen. First, we need continued participation from the Trillion Dollar Titans. NVDA should find support here and continue pushing higher toward the $240 to $260 range. GOOGL also needs to hold support and push into new highs targeting roughly $426 and possibly even $474.
What is cool about both NVDA and GOOGL is that they have very clean bullish invalidation levels directly below current price. GOOGL needs to hold $381 or it becomes increasingly likely that it fills the gap near $355, which looks like a pretty enticing short opportunity, especially after the all-time high trap and inverted hammer that formed on May 18th. I outlined the short possibility on GOOGL back on May 18th when that inverted trapping hammer first formed. The direction GOOGL breaks from this current two-day consolidation is likely going to be the direction that has edge over the next several days, and possibly even weeks, especially if it gaps out of the two day range.
NVDA should continue holding above $217, otherwise a deeper retest becomes highly probable.
GOOGL Daily Chart
In the full bull scenario, MSFT should break out higher and confirm that this recent consolidation was simply a bull flag. If that happens, the next major target would be around $475 at the gap fill from January 29th.
AMZN also appears to be forming a possible bull flag and could continue vertically higher toward the $300 area, following the 2020 analog I have laid out. Like GOOGL and NVDA, AMZN has a very clear bullish invalidation level below Tuesday’s candle around $255. If that level breaks, it likely means the stock is no longer in a vertical trend and needs to retest closer to $240 before finding support again.
TSLA could easily fill its overhead gap near $473, which is roughly 16% higher than the top of the buy zone I outlined in Monday’s newsletter. As long as TSLA continues holding above Tuesday’s candle, the bull thesis remains intact there as well.
META still has a lot of work to do for anything bullish to happen, but if it can reclaim the 100-week SMA, the overhead gap around $664 becomes a realistic target. Out of the mega caps, META is the one where I currently see the least amount of edge.
AMZN Daily Chart
Semis and the Big Picture
Beyond the mega caps, we would also want to see participation from names like TSM, AVGO, MU, AMD, and the other major semiconductor leaders. Personally, I just do not currently see great risk reward in AVGO to the upside, especially with earnings right around the corner, so I am staying away from that one for now.
If the Trillion Dollar Titans continue participating, there is absolutely a path for this market to continue moving immediately higher. However, if we start breaking below these key levels on the individual names and then eventually on SPY and QQQ themselves, then a larger, and honestly healthier, retest is likely underway. If that happens, I will outline the major downside risk levels and buy levels I am watching.
For now, as long as the $731 level on SPY and the $695 level on QQQ continue to hold, I am staying focused on strong names in strong trends and looking to enter those names when they present solid risk/reward setups with clear levels to trade against.
Hot stocks like ARM, which I featured in Monday’s Swing Trading Video, are a great example of this strategy. Beyond that, I am also watching INOD, FIVN, INTC, QCOM, WULF, LITE, GEV, COHR, QBTS, RGTI, and JOBY. All of those charts still look constructive and capable of further upside from here. I will go through all of these charts and more in my Friday Financial Forecast video for all RLT members.