ChartWatch Markets: The Nasdaq bull market is back... Or is it? Plus: Lithium's stellar rally reaches critical pressure point

In today's edition of ChartWatch Markets, we'll be covering the technicals for:

• Nasdaq Composite

• Lithium Carbonate Futures (Benchmark month, back-adjusted) GFEX

• Australian Spot Spodumene Concentrates ($US/mt)

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Nasdaq Composite Index

Analysis

There’s no denying it: The 20-Nov candle may well have sold me a dummy! 🤦

A “massive black-close-at-the-low-of-the-session” dummy!

It's been 4 straight days of gains since that signal, with the last 3 as decent demand-side showings… And judging by the very low accompanying volume – that demand encountered very little supply-side resistance.

In terms of cash coming into US stocks (i.e., "demand") – there is a commitment in terms of motivation (i.e., propensity to bid higher and higher prices) but not in terms of size. What do you make of that!!!? 🤷

I put to you: the demand-supply environment is “thin” (few buyers and sellers), and therefore motivation is having a greater impact than it might do at other times. The Thanksgiving Day Holiday likely explains some of this, and perhaps we'll get a better showing of commitment on the other side.

But perhaps I should not be surprised, given the last massive black-close-at-the-low-of-the-session candle on 10 October delivered the same result – absolutely zero follow through to the downside after that one as well. Is this a quirk of the US market 2025-style?

I don't think so. It would only take a cursory glance at the history of major reversals in the Comp’s price action to confirm in one’s mind that massive black-close-at-the-low-of-the-session candles should not be ignored…

I'm confident the MOTN (More Often Than Not) of this contention lies in favour of: The price tended to decline ex-post! ⚠️

But MOTN isn't ATT (All The Time). ATT doesn’t exist in markets! 😉

With the top of 20-Nov’s massive black-close-at-the-low-of-the-session now eclipsed – suggesting any latent supply that might have been lurking in its price range has likely been consumed – and with what now appears to be a “V” shaped rally (= consistent with demand-side control): I will revert to a more balanced Risk Bucket fill-level. ⚖️

When the market is this thin, volatility remains a danger, therefore I require confirmation the recent rally is not an aberration before I can move to an even higher risk setting. This requires:

• The short term trend ribbon begins to act as a zone of dynamic demand (i.e., a trough – and importantly a higher trough to 21898 – is set at or above the short term trend ribbon)

• Continued demand-side candles (i.e., white-=bodied and or downward pointing shadows) – particularly one’s with a high session close near 23570

• Strong demand-side candles on elevated volume – indicating removal of latent supply in the system!

Exclamation mark on the last point, because this really sums it up for me: We’ve seen a rally with little supply-side participation, and we didn’t get down to 21898 with that massiveblack-close-at-the-low-of-the-session candle by accident!!!

The motivated supply that drove us down there (I accept not on huge volume either – but certainly greater than this last rally) could still be lurking in the system. If they re-enter the market in size, we will see this interaction in the volume. Ideally, we do eventually see such an interaction, so that we know the demand-side has consumed this potentially dangerous supply.

Consume this supply, and the next leg up is all but assured...

Can I conclude by saying that these are interesting times indeed! Certainly, very challenging for this technical analyst! 😁

View

I moving back to a more neutral 1/2RP in my Risk Bucket 🪣. (i.e., my personal allowable capital allocation limit (i.e., Risk Position) for my investments in US stocks is 50%).

Key levels

The next critical zone of demand is 21898 – below it, the short term trend is unequivocally down and the long term uptrend is likely under significant pressure = ⚠️ 23570-24020 is the nearest critical zone of supply – the Comp must at least close within this zone with a strong demand-side candle to confirm the demand-side is moving back into control of the Comp's price.

Lithium Carbonate Futures (Benchmark month, back-adjusted) GFEX

Analysis

The last time we covered GFEX lithium carbonate futures was in ChartWatch Markets on 17-Nov. Note there has been a contract roll since that update, so some of the prices in the chart will be different from that update (they have been back-adjusted in line with regular futures contract roll practice).

In that update, we were tracking a powerful demand-side controlled sweep of the 89350-93400 former supply zone. The massive volume of that 17-Nov candle, along with its lead up – indicated substantial supply removal from the system (as much as it signalled the massive demand required to affect it!).

The lithium carbonate futures price subsequently topped out at 104440 on 20-Nov, and since, we’ve seen a credible supply-side reply in the form of the massive drop on 21-Nov. The price action has steadied, with a strong demand-side candle on 25-Nov setting 91940 as the most recent point of demand.

Yesterday’s candle (26-Nov) suggests the supply from 104440 is still lurking in the system. The last candle on the chart – today’s candle – is still live, so we cannot draw any conclusions from it yet. However, if it results in yesterday’s high being set as a lower peak to 104440, it will confirm my suspicions that we’ve likely reached at least a temporary equilibrium point in price. ⚖️

104440 may well cap for sometime – its formation smacks of “finding supply” after a strong run up. It's a critical point that will play on the market’s mind (the demand-side will be a little gun-shy on any approach for fear of a repeat selloff – and the supply side will view it as an area where their rivals engaged aggressively before and that they should not miss out on next time!).

Consolidation of rapid rises are healthy in bull markets. They help remove dead wood supply that cannot contemplate much higher prices, and replace them with demand/future supply that can. ✅

This is the building process for the next leg higher (should it occur – remember the future is unknown!).

The lithium carbonate price should not close below 91940 if the present strong upside momentum is to be maintained – and certainly not below the short term uptrend ribbon (presently 88030-91200).

The candles here will be instructive:

• An increasing prevalence of supply-side candles (i.e., black-bodied and or upward pointing shadows) will cement 104440 as a major point of supply, as will the formation of a lower peak or peaks.

Or

• Continued strong demand-side candles will indicate there's little supply-side motivation and interaction remaining, and therefore pave the way for a challenge of 104440.

View

Happy to stay the course on lithium carbonate. My technical model allows me to either add or maintain risk (i.e., "+R" or "=R").

Key levels

91940 is the key zone of demand, the lithium price should not close below it if the demand-side is in control of the lithium price = ⚠️ The short term uptrend ribbon (presently 88030-91200) is the critical zone of demand, a close below it nullifies the short term uptrend. 104440 is the next major point of supply, I will be watching the price action there very closely to confirm or deny the resilience and commitment of the demand and supply-sides.

Australian Spot Spodumene Concentrates ($US/mt)

Analysis

The last time we covered Aus spodumene was also in ChartWatch Markets on 17-Nov.

In that update, we were tracking a strong move above the critical 1045 former point of supply. No doubt lithium bulls are fully aware of what's happened since – a consumption of the 1210 major point of supply – to fresh 20-month highs!

Unfortunately, I only started charting this market in Dec 2023, so I cannot confirm any price action prior to this date. If someone reading this has the data before 8-Dec 2023, please get in touch and I will add it to my chart.

This chart is a picture of demand-side control:

• Rising peaks and rising troughs ✅

• Powerful / long motive phases (i.e., trough to peak segments) vs relatively shallow counter-trend phases (i.e., peak to trough segments) ✅

• Major points of supply are offering little impediment (there is very little latent supply lurking in the system at these typically key psychological turning points) ✅

View

Happy to stay the course on Aus spodument. My technical model allows me to either add or maintain risk (i.e., "+R" or "=R").

Key levels

1120 is the closest point of demand, the lithium price should not close below it if the demand-side is in control of the lithium price = ⚠️ The short term uptrend ribbon (presently 1025-1080) is the critical zone of demand, a close below it nullifies the short term uptrend. 1245 is the next point of supply, I will be watching the price action there very closely to confirm or deny the resilience and commitment of the demand and supply-sides.