Stock Market Predictions For The Week of June 8

Stocks will try to keep their massive rally going this week, but with an FOMC press conference on Wednesday, anything can happen. The most significant risk to the market is an indication that the Fed will pause its QE program or continue to wind down the purchase of Treasuries. The Fed’s balance sheet expansion has seen a noticeable slowdown in recent weeks.

By the way, the correlation between the Nasdaq 100 and the Fed Balance sheet is just 0.687, with an R^2 of 0.47 since QE started in ’09, so not the strongest correlation.

S&P 500 (SPX)

Following Friday’s rally, the S&P 500 is now overbought based on the Bollinger Bands and the RSI. Still, it doesn’t mean the index can’t continue to run higher to start the week, with the next level of resistance around 3,265.

Nasdaq 100 (QQQ)

I took a fresh look at the Q’s because after being so horribly wrong on several occasions, it seems it is worth a shot. The Q’s do have an RSI that is now over 70, and what appears to be a rather large rising wedge pattern. It would suggest a pullback is on the way, perhaps to $224, then $203.

Qs to IWM

I pointed out this chart to subscribers in the midday commentary, I think, on Thursday. It is the ratio of the QQQ/IWM. It suggests to me that the Qs are due to fall relative to the IWM (IWM). Perhaps back to the 1.4 level. It could merely mean that Q’s fall and IWM rises, or the Q’s fall at a faster pace than the IWM.

qqq/iwm

Netflix (NFLX)

There may be a head-and-shoulders pattern forming in Netflix, and a break below $397, likely sets up that drop to $360.

netflix, nflx

Roku (ROKU)

Roku doesn’t look good again, with an RSI that is trending lower and a stock that is sitting on support. A drop below $102 sets up a fall back $80.

roku

Facebook (FB)

Facebook now has a bearish divergence in it, and the stock appears to have formed a descending triangle, with a break of support at $220, the stock probably drops to $201.