Recent selling pressure should be nearly complete after having pulled back to test early February lows. Short-term momentum has gotten oversold, and many key large-cap tech stocks look to be in/near support. Furthermore, Treasury yields and the US Dollar have been breaking down sharply and I don’t see the correlation between Treasuries and Equities reversing anytime soon. Moreover, sentiment has continued to grow more and more negative, given the constant rhetoric regarding tariff uncertainty, and the larger intermediate-term uptrends for SPX remain very much intact. While I view a technical violation of February lows as about a 50%/50% chance, given that momentum is so strongly negative over the last four days, I feel it’s right to position long and simply expect that any further selling won’t prove too severe for the last few days of February before beginning a sharp rally up into March. Overall, I suspect that NVDA’s earnings very well could prove to be a positive catalyst for Technology and Equity indices after this sharp near-term downturn.
SPX lows should be near
Not the most inspiring price action Thursday morning as NVDA earnings beat failed to materialize into any meaningful gain for the stock during the opening few hours of trading on Thursday morning.
The key new developments have to do with sentiment reaching extremely bearish levels along with Technology’s weakness getting back down to support after gains for early February were given back over the past week.
Overall, there continues to be mild stabilization only with SPX but no meaningful movement higher nor lower since Tuesday’s close. My comments given the choppy trading on Thursday are similar to Wednesday night. I feel like lows should be in place by Monday, 3/3/25, and Equity indices should be set to bottom as February comes to a close.
Any attempt at violating SPX-5900 should not lead to dramatic downside acceleration between now and next Monday, in my view. A minor break might find support near 5850-5875, but I am largely expecting stabilization and a rally to begin in the days ahead.
S&P 500 Futures are showing some positive divergence to NASDAQ which has fallen to new lows for the month early on before attempting to rebound. Unfortunately, Thursday’s price action doesn’t yet provide the kind of conviction investors want to see that a low is in place.
I expect that any early weakness on Friday following PCE data and inventories might provide a buying opportunity for SPX and QQQ, and technically, the downside seems limited.
S&P 500 E-mini Futures
Technology has been a Rollercoaster, yet it looks far from being broken
Interestingly enough, Technology’s underperformance in the past week has caused many investors to feel like the Tech trade has begun to unwind again, which is not dissimilar from what happened last summer or January.
The chart below helps to put this into perspective. While the near-term weakness has certainly proven extreme over this past week, Technology has simply given back some of the strength that was seen in early February.
When seen in Equal-weighted terms, “Tech” has not violated trends vs. Equal-weighted S&P 500. Technology began to emerge again after the Summer Selloff of 2025 back in December of last year, directly following the Election.
While this sector has seen a massive amount of Rotation, it still looks to be in good shape.
Moreover, those who take a look at the differences between daily charts of AMZN, GOOGL, and META -1.69% vs. weekly charts can see the massive difference in how these look visually. Those with short-term time horizons see a giant decline, which is completely valid. However, the weekly charts in AMZN, GOOGL, and META all show this recent deterioration to be nearing key uptrend line support on weekly charts.
Thus, having an intermediate-term perspective helps to provide a different and more optimistic picture of the technical trends.
Technology ratios vs. SPX in Equal-weighted terms, seen as (RYT vs RSP -0.95% ), demonstrate this same visual difference between near-term damage not having negatively influenced the weekly intermediate-term charts.
RSPT/RSP
AAII Bulls-bears data has reached truly bearish extremes
Last week’s AAII Bulls-bears spread has inverted to over 40% in favor of the bears. This is an unusually bearish reading, given that SPX just made new all-time highs six trading days ago.
The percentage of Bears reading reached 60.60 while the percentage of Bulls reached 19.40.
Every other time in history, the percentage of Bears has reached 60%, and SPX has been oversold after a sharp decline. Yet, as of now, SPX’s weekly RSI shows a 53% reading, while its monthly RSI is at 68.5%.
As seen below, there are only a few times in history which fear (as per the AAII data) has reached such negative levels. The last two occasions occurred near the bottom of the stock market decline following severe bear markets of 2007-2009 and 2021-2022.
AAII
The other times in history when the percentage Bears reading has eclipsed 60% are as follows:
9/29/2022- 60.8%
9/22/2022- 60.9%
3/5/2009- 70.2%
10/9/2008- 60.8%
10/18/1990-67%
8/30/1990- 61%
Our current reading for 2/27/2025 is 60.6%.
Fear and Greed Index also has dropped to show “Extreme Fear.”
One additional sentiment poll is from CNN-Business showing their popular Fear and Greed poll. This also has reached extreme levels of negativity, shown below as “Extreme Fear”.
Interestingly enough, Options implied volatility does not show this extent of fear, as the Equity Put/call ratio is only trading at 0.60.
However, when looking at NAAIM readings, JPM Global Equity Sentiment, The Societe Generale Sentiment indicator, and CTA exposure, they’ve all contracted from levels seen last November.
My conclusion is that sentiment is indeed bearish, even if it does not show capitulation. This marks the difference in sentiment given the lack of true “Selling pressure” based fear vs just an overall negative level of sentiment.
