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 greater than 20% rally in QQQ over the last 18 trading days from 4/7 lows (almost 1% on average per day). Treasury yields and US Dollar have begun a bounce, while the safe-haven trades like precious Metals and/or Japanese Yen and Swiss Franc have begun mild corrections. Moreover, Bitcoin, which bottomed the same day as Equities on 4/7, has also been trending up nicely and could be nearing its own resistance within the next week from $102k-$108k. Overall, despite minor concerns of a possible stallout in risk assets in the near future, price action remains bullish and will trend higher by the end of the week. As of Friday’s close, there’s been no technical evidence of reversals of any kind, and SPX, QQQ remain a bit below resistance.
SPX is growing closer to upside targets at 5750-5800 which could mark an initial area of resistance to this rally off the early April lows. 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, or QQQ-503 without either some progress on tariff negotiation, or some consolidation to recent gains. 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. Additionally, signs of Small-caps kicking into gear this past week is a big positive for the US Equity market and should help downtrodden sub-sectors like Biotechnology and Regional Banks begin to show more strength in the weeks ahead.
Overall, while trends arguably remain positive for US Equities in the short run, 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 to favor rallies back to new all-time highs this coming fall (meaning SPX, QQQ, DJIA all have the chance of pushing back to new highs eventually). Furthermore, pullbacks in Equity indices, if and when they begin in May, should be seen as buyable at higher levels than April lows, in my view.
AS shown below, SPX has rallied to right below late March 2025 peaks and also lies right near an area of Ichimoku cloud resistance directly above. While not shown, TD Sell Setups (an exhaustion indicator formed by nine consecutive daily closes above the close from four days prior) could be completed on SPX by next week.
The bottom line is that I’m not fond of selling into rallies without any proof of a reversal. If price begins to stall out next week, followed by a push down under the rising 5-day moving average and/or breaks the uptrend from 4/21 lows, then it’s proper to give this a bit more credence. At present, some investors who don’t quite understand why the rally is happening in the absence of tariff negotiations are now quick to sell into this advance. While some kind of stalling out could be possible over the next few weeks, it’s incumbent on the market to tip its hand in this regard.
As discussed last night, for those investors who might be in need of more diversification outside of Technology, I do find it attractive to consider Gold, Treasuries, and/or Utilities at current levels, thinking all should be higher within the next month.
As shown below, the two black horizontal lines intersect from 5750 up to 5800 and might have some importance next week.
S&P 500 Index
Small-caps look to be turning up sharply vs. Equal-weighted SPX
Friday’s outperformance in IWM over SPX, RSP, QQQ, DJIA has helped the relative chart of IWM vs. RSP (Invesco’s Equal-weighted SPX) to exceed highs going back to March 2025.
This is an impressive feat of strength from Small-caps which have outperformed RSP since the early April 2025 bottom in US Equities.
Last month, I discussed that the act of High Yield spreads beginning to collapse had historically driven strong returns in Small-caps. Following the early April scare in Treasuries, which lifted long-term yields roughly 50 basis points in about four days’ time, there’s been a meaningful contraction in Junk spreads as High Yield Corporates have tightened considerably vs. Treasuries.
Today’s outsized gains in Small-caps have helped the relative chart (IWM to RSP) to exceed last week’s peaks which had shown a minor DeMark-related exhaustion signal. Thus, the act of having surpassed those highs from last week should now enable Small-caps to outperform in the near future and potentially an intermediate-term basis.
This looks to be an interesting development at a time when many investors have begun to openly discuss “The R-word” (Recession). Overall, I am in favor of Small-caps following through on this recent strength and expect outperformance in the days and weeks ahead.
IWM/RSP
Regional banks have also begun to show better relative strength
In the last few weeks, there has also been evidence of Regional banks starting to show more relative strength, which looks to be directly coinciding with Small-caps beginning to show better strength off April lows.
This relative chart of KRE (SPDR S&P Regional Banking ETF) vs XLF (SPDR Select Financials ETF) has turned up to multi-week highs this week after three straight weeks of outperformance.
(Thus, when this ratio is trending higher, it shows outperformance by KRE over XLF.)
I expect that many areas tied to Small-caps, such as Regional Banks as well as Biotechnology, should begin to show better outperformance than has happened so far this year.
KRE/XLF
Gold vs. Bitcoin looks to be approaching a time to favor Gold
As shown below, the ratio of Gold to Bitcoin, as shown by their respective ETFs in ratio form (SPDR Gold Trust – GLD, vs. Bitcoin’s IShares Bitcoin Trust IBIT) turned down sharply starting in April as Bitcoin rallied, coinciding with Equities, while Gold sold off.
This now looks to be close to stabilizing after dropping over the last three weeks. Thus, while Bitcoin has been pressing higher in recent weeks, it looks to be closing in on resistance between $102k-$108k.
Meanwhile, Gold has dropped along with other “Safe haven” trades as the Equity rally has commenced. Interestingly enough, the TD Buy Setup on the ratio GLD/IBIT is also nearing a similar signal on VIX. Additionally, both SPX and QQQ might generate similar but opposite signals as of early next week.
My thoughts on Gold are that it should be close to bottoming out, and likely begin a rally back up to near $3750. Moreover, Silver should likely also begin to show some strength, but its own cycles favor June 2025 to June 2026.
The bottom line is that for those who feel Bitcoin is suddenly playing “catch-up” to Gold, I feel that this should prove to be incorrect. Gold looks close to bottoming and should be considered by investors as it begins its move back to new all-time highs, technically speaking.
GLD/IBIT
