This remains a choppy market for US Equities in the near term as part of a stellar ongoing intermediate-term uptrend, which has shown no evidence of deterioration despite any of the recent DeepSeek and/or Tariff-related volatility spikes. Despite the positive recovery in Technology lately, the broader market continues to lag, and indices like Equal-weighted S&P 500, DJ Transportation Avg., and Russell 2000 remain well off highs hit last December. However, sentiment regarding tariffs and their possible negative implications for the US Stock market has gotten quite bearish for both the Equity and Bond markets in recent weeks, which I believe is a positive. I suspect that any weakness this week into/post-CPI should create an attractive opportunity for the back half of February. Rallies back to new all-time highs will take time, but it’s expected that the next large move should involve both stocks and Treasuries pushing back higher, not lower after this minor consolidation has run its course. Intermediate-term trends are bullish, and pullbacks at this point will likely hold at 6000 before pushing up above 6121. Such a move would likely coincide with a move up to 6300 initially with intermediate-term targets at SPX-6650.
The waiting game is here, and if Tuesday’s lack of volatility was any clue, traders might be more concerned about political uncertainty (tariffs, debt ceiling, Govt. shutdown) than any real worries regarding monetary policy. Given the tightness of the recent range in both SPX and QQQ, it’s expected that a breakout is nearing.
However, attempting to front-run this breakout might be ill-advised for those with short-term timeframes, as price has still failed to recoup the prior reversal which happened from last Friday. Indeed, prices have largely moved sideways for the last couple weeks as part of a lengthier sideways range since early December.
While the overall level of market resilience is considered impressive given the constant negative rhetoric espoused by the media, it’s thought to be important to have a catalyst which might be able to help SPX and QQQ finally surpass their recent resistance levels.
That might come about on Wednesday, but also might be postponed until NVDA’s earnings which are hugely important for the Technology sector.
Overall, given that the trading range is growing increasingly narrower, a coming breakout is likely approaching, which should help US Equities begin to turn back higher.
Unfortunately, given the minor bounce in both US Dollar and Treasury yields, it’s hard to say with a lot of confidence that this move is imminent. Ideally, it should prove important for risk assets to see Treasury yields start to turn down sharply along with a similar move in the US Dollar. If this were to happen as SPX gets above 6021 and QQQ exceeds 532, it would then be more likely that markets would begin to extend sharply higher.
S&P 500 Index
While the recovery in Technology certainly seems important, a broader market rally at present has been lacking in recent weeks. Moreover, it certainly could be possible that a strong push in Technology could carry the SPX and QQQ higher at a time when other sectors are struggling. However, greater confidence will arise when Industrials, Healthcare, and Discretionary start to shrug off their recent consolidation and turn back higher. A similar bout of strength in the absolute charts of Small, and Mid-caps would also be significant.
Key levels for the SPX lie near 6021 for both SPX cash and Futures. Meanwhile, areas of support for SPX lie at 6044.84, then 6020 for the cash index. S&P Futures have support near 6067.
Elliott-wave theory seems to suggest the possibility for yet another minor pullback, which would make SPX highly attractive
Given the choppiness of recent weeks and months, taking a closer look at some of the wave structure of SPX and QQQ can normally be helpful to putting some of this recent consolidation into perspective.
While some investors feel like a move back higher should be imminent, (and this can’t be ruled out) an alternate scenario involves some initial weakness post CPI, which might lead to a bounce in Treasury yields and minor pullback in SPX before some stabilization and subsequent push back to new highs.
While this is not my analysis, and is being shared from the Elliott-wave Forecast group, even in this scenario, it’s doubtful that SPX undercuts 6000 and any Wednesday weakness finds support in short order and starts to turn back up.
SPX
Tariffs seem to have affected Industrials, Materials, Energy, and Communications Services the most in 2018
As shown below, the announcement of tariffs in early 2018 seems to have had the greatest effect on groups like Industrials and Materials (Not to mention Energy and Comm Svcs.)
While each cycle can be different, and the falling US Dollar in 2025 along with a weaker amount of demand from China might present a different picture for these sectors than what happened back in 2018. Furthermore, the FOMC is in a cutting cycle this year for Rates and the US seems to be in a different part of the economic cycle than prior.
Nonetheless, it’s important to keep a close eye on all sectors this year for sudden evidence of turning down, which might not immediately “square” with the fundamental picture.
S&P 500 Industrials, Materials, Energy, and Communications
Industrials weekly chart relative to SPX still looks attractive despite all the tariff talk
The minor consolidation in Industrials in relative terms hasn’t really caused any damage to the broader Industrials trend, and this remains attractive and a Technical overweight.
As can be seen below, despite the minor peak post-election in 2024, there’s been no material breakdown in this relative chart of Equal-weighted Industrials vs. Equal-weighted S&P 500 (RGI vs. RSP).
If, and when this starts to happen, I’ll discuss possible ramifications as there looks to be a possible coming inflection point based on DeMark’s exhaustion indicators on Industrials when viewing this on a monthly and also Quarterly basis.
However, as discussed previously, until/unless counter-trend signals from TD Sequential and/or TD Combo are properly confirmed AND uptrends are violated, it makes little sense to mention.
This is a technical negative.
Trends remain quite strong and my thinking is that Industrials should begin to stabilize after this two-month consolidation and turn back higher to new monthly highs.
RSPN/RSP
Aluminum charts seem to be shaping up for a coming breakout
Charts of many Steel and Aluminum stocks rose sharply in recent days as the announcement of Steel and Aluminum tariffs went public.
However, the price of Aluminum itself looks to be quite attractive at current levels, and increasingly needs to be monitored for evidence of an upside breakout.
As shown above in this daily LME Aluminum futures chart (London Metals Exchange), which is quoted in Dollar/Metric Ton, Aluminum pushed sharply higher on Wednesday to close at multi-day highs.
Yet this broader period of consolidation is ongoing and requires a move over $2711 to have an influence on causing an actual breakout.
Given that prices are reaching the apex of this triangle pattern from mid-2024, I sense that prices do likely push higher and break out in the weeks to come.
Movement above $2711 likely results in a push above $3,000 in short order, technically speaking.
Charts of Aluminum stocks that appear attractive and stand to potentially benefit from a coming breakout are CENX, AA, as well as the SPDR S&P Metals and Mining ETF (XME). Furthermore, STLD is one of my favorite Steel stocks, technically speaking, and might also start to benefit on a coming surge in base metals.
Aluminum
