Monday Market Pulse
RLT Newsletter
Selling pressure continued on Friday as both SPY and QQQ closed near the lows of the week. SPY technically printed a gravestone doji, though TradingView is currently displaying a massive lower wick on Friday’s candle. Since all of that selling occurred in the final three seconds of trading, I am treating that wick as noise. It was most likely caused by market-on-close order imbalances or index rebalancing, which also explains why a huge amount of the day’s volume arrived in those final seconds.
Last week produced five consecutive bearish candles as technology continued to show meaningful weakness. That weakness, however, has finally brought many individual names, as well as SPY and QQQ themselves, back into or very close to important support levels.
SPY Analysis
If SPY gaps below or closes decisively below $725 at any point this week, I think that confirms we are in a larger C wave lower with downside toward my preferred buy zone between $695 and $710. There is an Anchored VWAP from the March lows sitting near $716.42, but I do not expect that level to hold if $725 breaks with conviction. The proportions of the correction simply do not line up for meaningful support there.
On the other hand, a gap above or strong close above $740 would suggest SPY is headed back toward all-time highs, where it either breaks out or forms a triple top ahead of a larger correction.
SPY Daily Chart
Semiconductors
Semiconductors may finally be pulling back after Monday’s bearish gap and go and the subsequent weakness off the highs. We have now seen RSI divergence across three separate all-time highs, yet the sector continued grinding higher through one of the strongest runs I have ever seen. The technicals are finally beginning to line up for a correction, particularly if the market starts taking seriously Apple’s renewed push to source chips from Chinese manufacturers, news that came out after Friday’s close.
The sector simply needs a rest. Since semiconductors have been doing the heavy lifting for the broader market, a pullback there could spark healthy rotation, most likely into software, with industrials and financials also well positioned to benefit. However, even with rotation if the market loses the semiconductors and the Trillion Dollar Titans, its going to be going lower, not higher,
SOXX Daily Chart
Software
Software names finally showed some life on Friday. NOW gained nearly 10%, MSFT bounced cleanly after finding support near $350, and IGV rallied over 4% after bouncing off both its Point of Control and the 200-week SMA.
As a pure software play, NOW remains my top pick. For traders looking for a less volatile option, IGV looks very attractive here. My bullish IGV trade worked extremely well back in early May when it formed a double bottom off the 100-day SMA, and it has now returned to test that exact same level again.
I am staying away from MSFT for now as the market appears to be turning against the hyper-spenders. That said, there is a legitimate bull case developing. MSFT has extended to roughly 61.8% of Wave A, which is the minimum length we want to see from a Wave C . Plus the chart appears to have completed a clean five-wave decline from the highs. Those factors together make a sizable bear market rally a very real possibility, and I covered that setup in detail during Friday’s Swing Room.
IGV Daily Chart
Financials
The double bottoms forming across the financial sector have caught my attention.
AXP is my favorite chart in the group. Its large weekly double bottom has found support at the 100-week SMA on both pullbacks. My biggest regret is not having it on my watchlist back in May. The stock printed four consecutive hammer candles off the 100-week SMA before breaking out, which is one of the strongest continuation bottoming patterns you will ever see, and it delivered exactly what that setup promised…gains.
That support remains intact below current price, and I do not think AXP breaks down without a significantly larger market correction.
There is an unfilled bullish retest gap from two weeks ago near $325. If price pulls back to fill that gap, it presents an outstanding buying opportunity. If it never fills and simply breaks higher, there is an open gap near $373 that makes for an excellent long-term position trade target. The neckline of the weekly double bottom sits around $334, and any pullback into that area is a level I am watching closely.
AXP Daily Chart
Prosperity Portfolio Update & 10 Week Master Class
If QQQ closes below its 50-day SMA, my cash position will increase significantly. The Prosperity Portfolio, my rules-based QQQ trading plan, will trail out of its current position for roughly a 16% gain since entering on April 9th.
That would put the portfolio up 104% since I started trading it at the beginning of 2023. Over that entire period, the largest drawdown was only 4%, and those returns came from just 18 trades.
What I value most about this system isn’t just the returns, but how they were achieved. It’s a strict, rules-based approach that removes emotion from the decision-making process entirely, and I teach the exact trading plan to every student in my Swing Trade Master Class.
Every student in this spring’s class had the opportunity to take this trade. On a $50,000 account, it would have generated roughly $8,000 in profits in the last 2.5 months, enough to cover the cost of the class with approximately $5,200 left over.
I’ll be the first to admit this type of price action isn’t normal, and I don’t expect every trade to perform like this. What I do expect is for the system to keep doing what it has proven it can do: stay consistently profitable while managing downside risk aggressively. At the end of the day, protecting capital is our main job as traders and investors.
QQQ Daily Chart
