It is my fervent wish that the mega-rally we saw on Friday will be remembered as a fantastic bull trap. Some of the big ETFs suggest that it will be.
The first chart, that of the Dow 30 ETF, has not a single bearish thing about it. This is a clean breakout to lifetime highs.
The EFA, which represents equities outside of North America, is neatly within the confines of its nearly year-long ascending wedge.
The small caps, however, are looking frazzled. They broke their Liberation Day uptrend months ago, and IWM likewise broken its more recent uptrend. The full-scale break on Thursday has been undone for now, but the damage to this trendline means something.
The semiconductor sector has a very close shave, almost breaking the trendline on Thursday, but the Friday rally saved them. A failure of this trendline would be a very big deal for the one or two people crazy enough to still be bears.
I am especially fond of the S&P 500 ETF, which has clearly broken its wedge and has been hyperventilating ever since. So long as we don’t rally to lifetime highs, this ETF is very vulnerable to resuming its weakness, particularly if crypto’s insane lift on Friday was a one-hit wonder.
Energy, in sharp contrast, is a superstar, continuing to blast above the base it finished weeks ago.
The consumer staples is likewise supercharged. That pink area denotes a pattern that was about 80% complete, but it was aborted and negated with a sensational almost straight-up rally.
With precious metals in a completely convulsive state, I am stating far away from any funds related to metals, precious or otherwise. I would note that the metals and mining fund shown below is in a short-term downtrend and could easily retrace to the dashed line I’ve drawn.
I’m actually much fonder of making money with shorts in a general uptrend than when everything is getting nuked. If nothing else, I’ll continue to focus on that task. The week ahead is going to be exceptionally interesting, since everyone will be watching and wondering whether Friday was a freak incident or instead if it’s simply a return to business as usual.
