Short-term trends are bullish but extended following the recent pushback to new all-time highs for SPX and QQQ, while many other indices failed to participate. While DJIA, RSP, and IWM should eventually begin a similar move back to new all-time highs, at present, some minor consolidation looks to be underway in large-cap Technology following a stellar comeback. Given the subdued sentiment on both the Retail and Institutional levels, I continue to view the larger move for Equities as being higher. Moreover, a bullish equity structure combined with solid momentum and breadth warrants the overweighting of US equities at a time when investors are largely unclear about the extent of tariffs or their implications. In the short run, it looks possible that SPX might show a minor retreat down to 6050-6075. However, ample reasons remain for optimism in the “larger scale of things” given the rebound in Technology.
SPX has begun a minor retreat; however, this is expected to prove short-lived into early next week
SPX looks likely to pull back in the short run following its recent pushback to new all-time highs on Tuesday of this week.
As discussed on Wednesday, many other indices had failed to join SPX and QQQ back at new all-time highs and futures prices had diverged negatively.
Large-cap Technology (via XLK -2.57% ) had shown evidence of counter-trend exhaustion vs. RSP, and it was thought that some minor consolidation might be likely following a stellar 3% gain over the past week.
Ideally, this consolidation should take the form of a three-wave decline into early next week ahead of stabilization and a turn back higher.
Overall, I do not see SPX undercutting 6000 into next week, and any pullback to 6050-75 should represent an attractive opportunity ahead of a pushback to new highs.
S&P 500 Index
Europe’s STOXX 50 index has just reached 2000 peaks
As shown below, this area near 5500 looks very important for EuroSTOXX 50 index following a stellar runup in recent years.
This represents the first retest of all-time highs for EuroSTOXX 50 since March 2000.
Normally, some degree of stalling out can occur when indices revisit a very prominent former level of all-time highs.
Given that this recent surge occurred as the Euro was falling sharply vs. the US Dollar during much of 2024 and has now begun to reverse back higher, I expect that European outperformance should demonstrate some mean reversion lower in the months to come.
EURO STOXX 50 Index
Ratio charts show EZU vs. SPY rapidly nearing strong resistance
While European Stock indices have outperformed the S&P 500 since the beginning of 2025, this recent surge in relative strength is not expected to last.
Given that EuroSTOXX 50 has now reached the former prominent highs from 2000, I expect some stalling out in this index along with STOXX 600 before some near-term underperformance.
As this weekly chart shows of EZU -0.71% vs. SPY -1.60% shows, this ratio is now just below a very important downtrend from 2023.
While I suspect that a TD Sell Setup might materialize ahead of this turning back down, (which looks to be 1-2 weeks away) this ratio has neared the prominent downtrend from 2023 at a time when EuroSTOXX 50 index has reached all-time highs.
Overall, I don’t suspect that this ratio of EZU to SPY will break the ongoing downtrend from 2023 as part of the larger downtrend from 2021, nor get above prior 2022 lows.
Thus, it’s likely this recent early year outperformance in Europe likely could stall out and reverse course in the weeks ahead, giving way to US Technology leadership which results in this ratio falling back down towards former lows.
EZU / SPY
Silver looks primed to play “catch-up” to Gold
As shown below, Silver has just begun to push back to monthly highs following its two-month consolidation from October into December 2024.
I noted last week that the ratio of Silver to Gold had pulled back sharply and looked to be stabilizing near former lows. This ratio signaled DeMark-based exhaustion, which made it appear timely to favor Silver.
Given that the US Dollar has begun to decline sharply which has served to boost Chinese Equities lately, I suspect that Silver might possibly benefit given China’s recent success in showing a strong Equity bounce after recent consolidation.
As many are aware, China was the world leader in imports of Silver ores and concentrates (Not refined Silver) as of 2022, with imports valued at $2.5 billion.
Given that Gold and Silver tend to have a tight positive correlation over time, favoring Silver looks technically promising as this metal begins to play catchup in the weeks to come.
Overall, I expect a pushback to the low $40’s in Silver in the months ahead. However, both Silver and Gold still appear attractive at current levels.
Silver Futures
Silver cycle should be bottoming in mid-February and rally into October
I put together a composite of some of the more accurate cycles affecting Silver going back since 2010, and the conclusion is that Silver looks to be bottoming in the short run.
This composite has not always enjoyed the same magnitude of moves as seen in this composite. However, it’s had some notable successes with the peaks in 2011, 2016, and 2022 while having bottomed in 2016, 2019, 2022, and more recently, 2024.
The minor pullback in late 2024 looked to have occurred from October to December of last year.
Now, this weekly cycle looks to be bottoming and should help Silver begin to carry higher in the months to come. I’ll monitor this closely, but Silver (SLV -1.14% ) ETF and the Silver Mining stocks (SILJ -4.76% ) look attractive at current levels.
Silver Cycle
