SPX hits New highs on negative breadth as IWM, RSP, DJIA lag

SPX’s technical trend, breadth, and momentum began to turn more bullish late last week, and the move above SPX 6021 has now pushed up to challenge all-time highs. Technically, short-term trends (between now and the end of January) likely will require consolidation ahead of a broad-based move back to new all-time highs, and Wednesday’s negative breadth was an interesting development given the renewed pushback into the Magnificent 7/AI stocks. DJIA, RSP, and IWM all remain underperformers on this bounce, and TNX and DXY are now nearing short-term support. The rebound in Healthcare, Financials, and Industrials look particularly important as positives that should carry SPX higher over the next 3-5 weeks.  While the risk/reward doesn’t look as appealing between now and the end of the month, any ability to consolidate 38-50% of the rally that began last week should put the SPX in a very favorable risk/reward position.  

As discussed, technical trends for US Equities have turned more bullish, and a move back to new all-time highs in many US indices seems to be underway.  In the short run, however, there appears to be some serious degree of lagging in the Equal-weighted S&P 500, Russell 2000 ETF ($IWM) along with the DJIA.   Each of these has managed to rally to the exact 61.8% Fibonacci retracement area of the pullback since December 2024 highs, an area of short-term resistance.

While the strength in Technology has been an important driver of US index returns this week and the return to AI/Magnificent 7 strength, it will be even more important when other US Index gauges also begin to show some strength.

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