By J.C. Parets & All Star Charts
1/ Participation Broadens
2/ EVs Reignite Investor Interest
3/ Crypto Miners Recapture Key Level
4/ Short-term Treasuries Reach an Inflection Point
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1/ Participation Broadens
It’s not just five stocks carrying the market.
We’ve made this point clear, but the market is making it even more difficult for the bears to hang their hat on this false premise.
Check out the equal-weight S&P 500 (RSP) digging in and finding support relative to the cap-weighted S&P 500 index (SPY):
The equal-weight index outperforming its cap-weighted counterpart suggests a healthy expansion in participation. It also puts to bed any notion that five tech stocks are driving the current rally.
Continued relative strength from RSP would bolster a sustained uptrend for equities. That may be the higher-probability outcome as rotation shifts down the cap scale into cyclical sectors.
2/ EVs Reignite Investor Interest
With Rivian (RIVN) in the midst of a face-ripping rally, EV stocks have reentered the investor collective consciousness. And it appears that the entire space could be preparing to rocket higher.
Here’s the iShares Self-Driving EV and Tech ETF (IDRV) on the verge of breaking out a year-long basing formation.
The path of least resistance for these names will point higher if and when IDRV absorbs supply at the shelf of former highs.
But it’s not all about Rivian or IDRV. A decisive breakout from this potential reversal pattern would also signal increased risk appetite as investors reach for these highly speculative tech stocks.
3/ Crypto Miners Recapture Key Level
Crypto mining stocks have been remarkably strong despite Bitcoin (BTC/USD) continuing to coil within a tight range.
The Valkyrie Bitcoin Miners ETF (WGMI) illustrates the recent strength of this space.
WGMI is completing a basing formation and reclaiming its August pivot highs after carving out a rounding bottom pattern for over a year:
Notice the lack of oversold readings on the 14-day relative strength index (RSI) and a flat to upward-sloping 200-day moving average, supporting the bearish-to-bullish reversal in the primary trend.
A decisive breakout would mark a big win for crypto bulls and speak to burgeoning risk appetite across the space. If today’s breakout holds, we imagine that it could be just a matter of time before Bitcoin and altcoins play catch-up.
4/ Short-term Treasuries Reach an Inflection Point
Yields continue to rise as investors brace for another rate hike later this month. This translates into sellers hitting the bond market, reviving last year’s woes.
Interestingly, the short-term 1-3 Year U.S. Treasuries ETF (SHY) is running into a logical level of potential support.
At the same time, the U.S. 2-year T-Note futures challenge a similar shelf of former lows, coinciding with its summer low from 2006.
Short-term bonds are reaching an inflection point. Whether they dig in and bounce higher in the coming weeks will determine whether investors will want to include these assets in their portfolio.
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Originally posted 10th July 2023
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