No change from yesterday- Both Treasuries and Equities look to be getting back in sync, as the gains in Treasuries over the last few days should constitute the start of a large pullback in yields, which might last until August. As discussed, the rally in both SPX and QQQ initially looks to extend into May as part of a larger rally, either in August or October of this year. SPX targets initially look to materialize between 5650-5700. While some backing and filling is possible in May, I don’t suspect it will prove too meaningful following this recent surge. Moreover, our April low should represent the possible low for the year, given the ongoing subdued levels of sentiment despite a 15%+ rally off the lows since the 4/7/25 bottom. As discussed, the combination of Technology having stabilized and shown good leadership off the lows, coupled with cycles bottoming, improved Elliott-wave structure, and meaningful breadth improvement in April, are all positives towards thinking our rally can extend while most are ready to take a victory lap. Overall, the improvement in Technology cannot be underestimated and many of the Magnificent 7 stocks have traded up to important levels (and in some cases, have already exceeded them heading into earnings).
Wednesday’s reversal was seen as a technical positive given that early losses occurred on very negative market breadth. April’s final day of trading coincided with strong 0DTE (0 Days til Expiration) option activity that might have exacerbated movement through the session.
However, as detailed in the intra-day Flash Insights, the SPX and NASDAQ/QQQ’s ability to have recovered the prior swing lows (5548.75 for S&P Futures, and 19485 for NASDAQ futures) was important and positive structurally. This suggested technically that the severe downside shock very well could have been just a one-day affair only as Elliott patterns improved on the ability to recoup those levels.
In the days ahead, while many investors might expect that a lack of options positioning and lower volume might indicate a lack of conviction on this relief rally, it’s proper to stick with this short-term uptrend until proper evidence of a reversal occurs which line up with either cyclical peaks, DeMark exhaustion, or signs of Technology starting to roll over again. Post-market close on Wednesday, Technology stocks, which have lots of importance for SPX and QQQ: MSFT 2.34% and META 4.31% , both positively surprised in post-market earnings and guidance. However, until the conference calls have been completed and there is evidence of these stocks opening near levels seen post-close on Wednesday, it’s proper to await Thursday’s session.
Overall, I suspect that SPX remains on track to push higher up to the resistance zone discussed in yesterday’s trading above 5650 up to 5700. If Thursday’s trading happens to open with an open gap in S&P and NASDAQ given favorable results from META 4.31% and MSFT 2.34% , this could allow for a push higher to test the peaks from late March.
At present the churning in price action over the last week does not have to necessarily be a technical negative. A gap higher that holds on positive results from MSFT and META could help markets extend even further without any noticeable trade agreements with Japan, China, or the EU.
S&P 500 Index
Technology has recouped the area of importance as it reclaims former pivot resistance in relative charts vs. the S&P 500.
The key technical development heading into this week’s Tech earnings was that last week’s surge in Technology proved to be so strong that it managed to successfully recoup the area of importance in relative terms to the SPX.
As shown below, the equal-weighted Technology ETF (RSPT 2.19% ) in its relationship to Equal-weighted S&P 500 ETF (RSP 2.08% ) managed to rally back above the area from last Spring and Summer’s relative lows that created the pivot area for the Head and Shoulders pattern in Technology.
As many investors were aware, the violation of this area shown by the horizonal blue line undercutting prior lows was a negative development in late March. It resulted in a two-week sharp correction for Technology.
However, to its credit, “Tech” never officially broke down. It held the area of intermediate-term support going back a decade, as shown by weekly relative charts (RSPT vs RSP).
This was a positive in terms of having found relative support, which made a strong case for stabilization, as Technology was still appealing on an intermediate-term basis.
The last week of outperformance has now resulted in Tech reclaiming the area at the pivot (former support, now resistance), which makes Tech more appealing as a sector to favor for near-term outperformance.
RSPT/RSP
Energy sector breaks monthly lows, suggesting additional downside pressure is likely as WTI Crude weakens
As shown below, this week’s pullback in WTI Crude oil has coincided with the Energy sector breaking down to make a month-end close for April at the lowest levels since March 2022, over three years ago.
This is a negative development that helps to reinforce my Underweight technical rating on Energy.
I expect that Energy likely should underperform until potentially the end of the 3rd quarter, and that WTI Crude prices likely are headed for the $40’s.
Areas like Exploration and Production along with Oil Services likely should prove to be much weaker than Integrated Oil in the months ahead.
In the short run, I expect that WTI Crude might attempt a brief period of stabilization in the coming days given the severe nature of this week’s breakdown. However, any counter-trend rally should not surpass April lows technically in my view, before rolling over to violate 4/9 lows.
If/when WTI Crude undercuts $50 into this Fall, there stands to be a possibility of a cyclical low that might prove quite important and positive for Crude. Thus, while Energy is now an Underweight, this might change upon a continued drop in WTI Crude throughout the Summer months. At present, one should consider avoiding the temptation to buy dips, technically, as WTI/Brent Crude oil, and by extension, the Energy sector, remains quite vulnerable to additional losses, technically speaking.
RSPG/RSP
Healthcare- Downgrading from Overweight to Neutral
The bounce attempt in Healthcare has failed to bring about much relative strength in this sector since monthly TD Sequential buy signals were confirmed on Healthcare vs. S&P 500 in Equal-weighted terms last month.
Since early April, Healthcare turned down sharply and has proven to be a disappointment. Unfortunately, despite the ongoing relative downtrend in Healthcare vs. S&P 500, I had expectations of a larger bounce in Healthcare than what’s materialized in recent months.
As shown below, the pattern since last October has proven quite choppy as part of the ongoing downtrend in Healthcare’s relative performance.
Until there is evidence of Healthcare starting to show better strength, I think it’s wise to downgrade this to a Neutral, from Overweight technically.
The chart below is shown on a weekly timeframe of the Equal-weighted Healthcare ETF (RSPH 1.77% ) vs. the Equal-weighted S&P 500 (RSP 2.08% ).
RSPH/RSP
