The unveiling of the first trade deal wasn’t enough to lift stocks out of their rut this week.
The S&P 500 fell 0.5% this week, while the Nasdaq Composite declined 0.3% Both logged their first down week in three weeks.
Markets have recently sharply rebounded from their April lows, emboldened by a good earnings season and progress on trade deals. Risky assets have made a big comeback. Bitcoin shot up to over $100,000, Tesla has rallied, and the small-cap Russell 2000 index has finished in the green for five straight weeks.
About 90% of the companies in the S&P 500 have reported earnings, with profits projected to have climbed 13.6% from a year ago, according to FactSet. Big Tech earnings in particular have been good, helping improve the market sentiment some, according to Head of Data Science Ken Xuan.
The biggest highlight of the week was the Federal Reserve meeting, where members unanimously decided to extend their wait-and-see outlook on interest rates yet again. Fed Chair Jerome Powell warned that tariffs were raising risks of higher unemployment and higher inflation. However, as he and the FOMC see it, the impact from tariffs hasn’t shown up in concrete data to the extent that a rate cut would be justified at this juncture.
Xuan interpreted the meeting as hawkish.
“I know it’s no surprise that they didn’t cut in this meeting, of course, but I thought if they’re going to cut in June, Powell should start to telegraph some signal. But he didn’t really signal much,” he said.
The ball on trade deals got moving this week. President Trump announced on Thursday frameworks of a trade deal with Britain. Details have yet to emerge, but definitely showed progress and the administration’s willingness to quickly get deals done, Xuan said.
Chart of the Week
Despite markets rallying in recent weeks, sentiment remains visibly bearish. This is evident by the many commentaries from macro investors and strategists who warn of declines ahead and is evident in the AAII sentiment surveys, according to Head of Research Tom Lee. He pointed out that in the latest AAII survey, the percentage of bears hit the highest level since April 2.
Heading into mid-day, overnight gains have largely disappeared in US Equities as investors await any hint of progress in US/China Trade talks this weekend. Realized volatility has lessened in recent days as the risk-on tone has improved, and SPX has rallied to near initial upside targets. Trends and momentum certainly have improved in the short-term, but there remains a lack of clarity that very well might not be answered to the extent that many investors might be hoping for this weekend. Trump has been talking about 80% Tariffs on China today while China’s Minister of commerce Wang Wentao has said “China firmly opposes abuse of reciprocal tariffs, but they remain committed to talks and its position in defense of its own interests hasn’t changed” (bloomberg) (Recall that 2018 tariff talks had quite a few “Back and forth” sessions until the Fed stepped in and their actions coincided with the end of the late 2018 decline. Overall, i see fractional upside for SPX into next week, but still not much evidence today to support the idea of any reversal ahead of the weekend. Short-term traders might consider using a 9-day moving average which lies at 5625, where a close under this level might allow for near-term consolidation. However, at present, the pattern in SPX remains constructive and should allow for a push up to 5750-5800.
Despite the minor intra-day pullback from earlier highs, ^SPX -0.13% still managed to close at multi-day highs, and should fuel a further rise in prices up above 5750 to near 5800 into late next week before a possible peak. The day of 5/19 has significance in timing, given that this lies 90 calendar days from mid-February, which turned out to be an important peak, and based on Gann theory, projecting forward 90, and 180 days forward from important peaks can often have importance in timing. This also would allow SPX to potentially record its first TD Combo “13 Countdown” exhaustion signal since the early April lows (which has more significance than a TD Sell Setup registered this past Monday.) Overall, the fact that six sectors experienced gains of more than 1% today is positive, and Industrials in particular outperformed given the performance of AXON -0.33% , GE 0.24% and many Airlines. Bottom line, a push higher into next week looks likely for US Equity Indices, and my technical target for ^SPX -0.13% lies between 5750-5800.
GE 0.24% move back above March peaks at $214.21 signifies a new all-time high for this stock, which represents nearly 20% of the Ishares Aerospace & Defense ETF. As shown below, this move represents a breakout above both February and March peaks which is a bullish development. Daily charts show that GE’s decline from February successfully held prior lows from December 2024, which kept the stock’s technical structure intact. Now the breakout back to new highs likely should help GE carry higher to $226, near the highs of its intermediate-term trend channel resistance connecting highs going back since last Spring. Thus, while the breakout in GE should help this make progress in the days and weeks to come, it likely will face resistance near $226 into mid to late May before faces some consolidation.
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