Note: I will be out of the office next week and will not be publishing daily technical strategy notes or videos.
Short-term trends in US Equities remain bullish but are nearing initial levels which might lead to a slowdown in this rally following a 15% rally in SPX over the last 17 trading days from 4/7 lows (almost 1% on average per day). While momentum is not technically overbought, I suspect that it might prove difficult technically for US Equities to continue trending higher above late March highs near SPX-5800 without some minor consolidation. While some backing and filling” could happen in May, I don’t suspect that April lows will be breached and undercut. Thus, our April low should represent the possible low for the year, given the ongoing subdued levels of sentiment, while Technology has begun to exhibit stellar leadership lately. While trends remain positive, I expect that the road likely gets a bit tougher from here over the next month before beginning a more sturdy uptrend. Overall, I expect that risk assets remain positive and will favor rallies back to new all-time highs this coming fall. Furthermore, pullbacks in Equity indices, if and when they begin in May, should be seen as buyable at higher levels than April lows.
Following gains of nearly 1% on average per day since the 4/7 lows, there are initial signs that a period of consolidation should be approaching in May. While momentum is not technically overbought per RSI readings on daily charts (and certainly not weekly nor monthly), the percentage of SPX stocks above their 20-day moving average has now eclipsed 80%, which certainly has occasionally marked minor peaks similar to February 2025, December 2024, August 2024, and July 2024, among others.
Furthermore, DeMark exhaustion signals look close to forming on daily charts for SPY, QQQ on the upside along with VIX on the downside. These might be complete into early next week and/or by the end of this week, representing a time when Equities might pause.
At present, DeMark signals are not in place on daily charts, and require a rally above Thursday’s highs at a time when AAPL and AMZN results failed to meaningfully impress post-close.
Bottom line, I dislike attempting to forecast weakness given a lack of meaningful signals when my outlook is for a push back to new highs in the months ahead. However, given the rise in Technology lately, there look to be various other areas that have appeal among risk assets which look attractive for those who might be considering diversification after this initial push off the lows.
Specifically, Treasuries, Gold as well as Utilities all have technical appeal, along with international Equity markets like Mexico and India at a time when the US seems to be attempting a comeback following early year underperformance.
Looking below, despite the late day selling in SPX ahead of AAPL and AMZN earnings which resulted in price closing down from the early day gap higher, I don’t expect that Thursday made any kind of a top.
It’s still likely that prices will push up to above 5700, which will help surpass the peaks from late March before any kind of minor high is in place. Moreover, dropping lower to close under the close from four days ago over the next couple of trading days would actually prohibit the DeMark TD Sell Setup from being registered in either SPY or QQQ. (Note, these don’t have to be in place to result in a market selloff, and/or consolidation, but it’s easier to make the case for such when a TD Sell Setup is in place.)
S&P 500 Index
SPY vs ACWX has not given any type of weekly reversal signal
It’s important to note that despite the outperformance in the US vs. All-Country World index (Ex-US) (ACWX) over the past two weeks, there wasn’t any official exhaustion signal that occurred, which might have given more conviction about this representing a bottom for US underperformance. While I expect this is near given the pullback to near a level of long-term trendline support, (meaning the US should begin to stabilize and turn back higher vs. ACWX) it’s hard to make the case at present.
Thus, after a 15% sharp rally in SPX off the lows in 17 trading days, I feel it’s still wise to consider favoring European, Latin American and Asian investments in the short run along with US, as diversifying a bit after this big push off the lows makes sense given no discernible signal in my work.
However, once additional proof of US outperformance starts to resurface (either by breaking downtrends in relative performance, or registering DeMark-related exhaustion on a weekly basis) one could begin to make a stronger case for only favoring US to show more relative strength vs. the ACWX, and show outperformance into Fall of this year.
I sense that time might be roughly one month away, but I can’t say for certain that our recent bottoming in US Stocks and sharp rally means that it’s here now.
SPY/ACWX
AMZN was very well positioned into earnings, technically speaking
Despite AMZN’s failure to deliver sufficiently better than expected 2Q Operating income guidance, the company did beat expectations across all major segments, including retail, Amazon Web Services (AWS), and Advertising.
As shown below, the stock did achieve a minor technical breakout ahead of its earnings announcement given its close at the highest levels since early April. (Note, this directly follows last week’s breakout of the entire downtrend from early February.)
Unfortunately, the stock looks to potentially open lower into trading on Friday given its weaker than expected guidance.
Technically speaking, a minor pullback to fill the gap from Wednesday wouldn’t constitute much technical damage. (Roughly $185). Technically, charts have improved in recent days, and it’s unlikely in my view that AMZN trades under $178.85 right away before starting to push higher to test $201.
This is the 50% level of the entire downtrend from 2/4. Note, the Ichimoku Cloud comes in a bit higher at $203 while late March 2025 peaks happened at $206.21. Finally, projecting an alternative retracement wave from yesterday’s lows which might possibly equate to the rally which started on 4/21, we arrive at $203.75.
Overall, I remain positive on AMZN unless this slips under $176, which likely would bring about a test of $164. I expect any early weakness to make AMZN more attractive technically before this starts to push up to near $201.
Amazon.com
VIX getting closer to support after huge collapse from 60
As shown below, the CBOE Volatility Index (VIX) looks to be on the verge of its first DeMark-related exhaustion signal on this decline from early April.
A decline under Thursday’s lows (23.30) looks necessary to bring about an official TD Buy Setup, and would likely mark a period where Implied volatility would begin to stabilize.
While such a signal does not constitute a sell signal for SPX, it could possibly represent an attractive entry point for those looking to buy implied volatility for the weeks ahead.
As this chart shows below, plenty of former turns (though certainly not all) did coincide with TD Buy and/or TD Sell Setups (this requires nine consecutive daily closes under the close from four days ago).(If at any time this count is interrupted before it reaches nine, the count has to restart.)
Bottom line, I suspect that VIX likely will begin to stabilize and likely make a minor bounce sometime in May. For now, it’s just important to identify the time when this TD Buy Setup is officially complete. That might very well materialize in the days to come.
CBOE Volatility Index – VIX
