S&P 500, Nasdaq, DJIA, Gold, Treasuries, TSLA Update

Even though every major index is marching to the beat of its own drum, it’s possible to see a common stock market theme. To help investors understand what’s going on, I’ve published below the entire February 28, Profit Radar Report update (which also includes analysis on gold, Treasuries and TSLA). Please notice how the summary section offers a cohesive forecast despite the market’s fragmented nature.

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Profit Radar Report, February 28, 2021 (5:45pm PST)

Thursday and Friday delivered a whippy conclusion to the week. DJIA spent Thursday above trend line resistance but relapsed back below it Friday and painted a weekly reversal candle against the trend line. 

Nasdaq-100: Wednesday’s PRR showed the potential for a 5-wave decline (with wave 4 invalidation level). As the side-by-side comparison below shows, the Nasdaq-100 Futures did set a new low for a legitimate 5-wave decline. The Nasdaq-100 Cash Index however, did not.

The daily chart shows a break below trend line support. A backtest of the previously broken support (now resistance around 13,300) is quite common. A close back above the resistance cluster (blue oval) will pause any pullback and possibly rejuvenate this rally. 

S&P 500 Futures almost tagged the rising trend line from the March low (3,780) on Friday. The blue oval highlights a support cluster at 3,720 – 3,780. The decline from the high looks either like 3 waves (which suggests the pullback is already or nearly over) or a 1, 2 setup (which would point towards down side acceleration once this bounce is complete).

Summary: Every index is marching to the beat of its own drum, and there’s even discord between the same index’ cash and futures chart (Nasdaq). DJIA painted an ugly looking weekly reversal. Nasdaq Futures declined in 5 waves but Nasdaq-100 Cash only in 3 waves (Elliott Wave Theory explains the significance of 3 vs 5-wave moves). S&P 500 (cash and futures) looks like a 3-wave decline and the S&P 500 Futures decline paused at important trend line support. 

S&P 500 Futures support at 3,780 held and first-of-the-month liquidity inflows tend to buoy markets, so odds of a bounce to start the week are high. We would prefer for selling to resume after this bounce exhausts (ideally Monday or Tuesday), but a move above 31,600 for DJIA, 13,300 for Nasdaq-100 and 3,900 for S&P 500 could embolden buyers again and rejuvenate the rally.

Gold couldn’t make it above the 1,830 resistance cluster (blue circle, daily chart) last week and continued lower. 

The weekly chart shows strong support in the 1,700 area, which is where the 2020 melt up started. A dip into that zone, if it occurs, would likely spark a bounce. How strong of a bounce is to be seen.

Wednesday’s PRR mentioned that TLT is likely to bounce from the 134 – 140 zone. From Thursday’s low at 136.61, TLT bounced already 2% with futures action suggesting more follow through Monday morning. Initial resistance will be at 143.60 – 146, but the selloff was strong enough to cause an even stronger bounce.

TSLA: The January 10 PRR included the chart and commentary below: 

The next chart shows the most likely Elliott Wave Theory labels. Wave 5 doesn’t have to be over yet, in fact a smaller wave 4 and 5 seems necessary to finish the bigger wave 5. Based on the log scale chart, there is resistance around 900. Will lightning strike twice and TSLA suffer two post-bowl collapses? My gut feeling says no, at least not initially, but perhaps after a brief violation of bowl support and subsequent rally continuation.”

The January 24 PRR followed up with this chart and commentary: 

TSLA paused at 884 and started carving out another triangle, which could be a smaller wave 4 before the last spike into a quickly reversed all-time high (possible resistance in the high 900s, depending on timing).”

The updates TSLA chart shows a 31% drop from the January 25 high at 900.40, which was a bit lower then expected. Thus far, price has stayed above trend channel support. A break below 607 could lock in a 5-wave decline along with the corresponding implications (counter trend rally followed by eventual new lows), but as long as price stays above, TSLA can still recover.

Continuous updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader

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Has the Great Unravel Started?

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on February 25. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Last week’s Market Outlook showed a mature 5-wave S&P 500 rally with the implication that risk is rising. We’ve also been keeping track of the 2021 similarity with 2020. Below is an updated year-to-date 2021/2020 S&P 500 performance chart.

Of course I’m not naive enough to expect an exact repeat of 2021, but since investor sentiment is even more over-heated in 2021 than it was the same time last year, the down side risk is elevated and should not be ignored.

Up until late January, I was looking for more up side, but that has changed. I explained why in the February 14, 2021 Profit Radar Report:

I spent hours analyzing the studies compiled and evaluated since February 1, and 11 of them project risk for the next month, only 2 favored reward. It’s a buying frenzy out there and rational analysis can be trumped by irrational behavior. A blow-off melt up before a return to normal jolts investors back into reality is possible. However, such a melt up is something an analyst allows for but doesn’t bet on.”

In addition to red hot enthusiasm a number of breadth studies even flashed a ‘too much of a good thing’ warning. Below are two of those studies published in the December 16, 2020 and January 17, 2021 Profit Radar Reports. Notice how forward returns of past precedents project weakness for Q1 2021 (red lines, bars).

Shorter-term, the DJIA is still close to the support/resistance trend line highlighted last week. If the Nasdaq-100 falls below 12,982 before rising above 13,476, the decline from the February 16 high will look like 5 waves and likely indicate a trend reversal. The short-term S&P 500 pattern is up to interpretation, but down side risk of the above studies looms over all major indexes.

If you are wondering what’s going on with 30-year Treasuries and TLT, you may find my analysis from the March 15, 2020 Profit Radar Report of interest:

Distrust in government is a global mega trend, with various government bond markets (especially Europe and Japan) being mainly supported by governments buying their own bonds. The US Treasury market may just have carved out a key reversal and perhaps major market top (which of course maybe postponed by today’s announcement to essentially resurrect QE and buy $700 billion worth of assets). In the land of the blind, the one-eyed person is king. The US equity markets may be the global ‘one-eyed’ go-to option.”

Continued updates and the new 2021 S&P 500 Forecast are available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

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