Short-term trends in US Equities remain bullish, and Monday’s gap helped price push up to test and exceed the upper end of my technical target for SPX (5750-5800) without much evidence of reversing course. Given that no time-based factors have appeared to confirm that 5800 might have some importance, it still looks early for a short-term peak. Meanwhile, “Safe-haven” trades like Gold, Treasuries, Japanese Yen, and/or Swiss Franc have all steadily weakened given the signs of tariff and geopolitical risk de-escalation in the last week. While Technology has outperformed every other major Sector in the last month on an Equal-weighted basis, there has been some evidence of outperformance by Equal-weighted SPX over SPX since early May. Thus, a broad-based rally has shown initial signs of materializing, which is benefiting Small-cap stocks at a time when many investors remain skeptical. Overall, it will be important to watch out for any evidence of breadth starting to dry up on this rally, and/or signs of US Equity indices starting to reverse course following May expiration. However, for now, a high-volume, positive market breadth rally, which closed near the upper quartile of Monday’s range, hasn’t provided the necessary signal that a pullback is imminent. While I expect that the road likely gets a bit tougher from here over the next month, it’s hard to fade rallies that haven’t begun to show much sign of fatigue. There could be some sign of this starting later this week or early next week, but at present, it looks wise to stick with this new uptrend for now.
As shown below, ^SPX 3.35% gapped open nearly 3% and finished the session near the highs of the day. Volume expanded by 10% over the average of the last month while breadth finished at around 3/1 positive. Until there are signs of some type of a reversal to new multi-day lows, or we see the rising 9-day moving average (m.a.) undercut, I believe it makes sense to stick with this trend this week heading into May expiration.
Options data from Bloomberg shows that this Friday’s May options expiry is “Call-heavy” with about 2-4 times call-to-put values on a delta notional basis rolling off. To some extent, one can say this has forced dealers to chase the rally, but the area near ^SPX 3.35% 5900 very well could serve as a magnet, given the significant positive gamma strike just above current levels.
As I pointed out last week, my preferred time of importance for May lies near 5/19-20th, which represents about 90 calendar days from the previous February 2025 peak. Rallies into this time likely could face a stalling out given Gann theory, and this 3-month timeframe of importance.
Traders should await signs of the 9-day m.a. being undercut (5657) or evidence of the uptrend being broken. Moreover, closing near the lows of the session makes for a bigger short-term bearish case than closing near the highs of the day on higher-than-average volume. From an investor standpoint, the recent rally has helped momentum improve and has significantly helped the technical structure. Meanwhile, sentiment has not turned bullish, despite a 20% rally in the last 25 trading days. (Nearly 1% higher every trading day.) The days ahead will offer more clues, but increasingly I am expecting a test of 5900 now, and will be watching volume and breadth carefully in the days ahead.
S&P 500 Index
Defensive trade underperformance might extend a bit longer
One of the important areas of underperformance that I have advocated for in the last week has been precious metals and the Gold and Silver mining stocks.
As shown below, Gold stocks have come under pressure of late, given the tariff de-escalation. The lessening of geopolitical risk has served to reduce the number of FOMC rate cuts this year to 2 by the end of the year.
Gold has sold off as Treasury yields have begun to rise in recent days. However, in the bigger scheme of things, technical trends for Gold, Silver, and Precious metals stocks remain in good shape on an intermediate-term basis.
The near-term pullback in the VanEck Gold Miners ETF (GDX -7.44% ) has undercut prior lows from 5/2/25, which looks to be a short-term negative development. However, the area near $44.50 looks quite appealing over the next 1-2 weeks on any further weakness. This would make Gold Mining issues technically even more appealing and provide a possible entry point on weakness for those looking for a push back to new monthly highs.
At present, patience looks necessary for those involved with Treasuries, Gold, Silver, Mining stocks, and/or Japanese Yen and/or the Swiss Franc. However, I expect that all of these are appealing on a 3-5 month basis and should begin to rally following May expiration.
VanEck Gold Miners ETF
Equal-weighted SPX nearing area of resistance from last Fall
RSP 2.74% , the Invesco Equal-weighted ^SPX 3.35% , has now successfully pushed higher to right below trendline resistance from last December’s 2024 peaks.
While momentum has nearly gotten overbought (based on daily RSI levels), DeMark-based exhaustion (based on TD Combo) won’t materialize for another 7-9 trading days.
The area of resistance for RSP might occur near $181, which would provide another 4 points of upside for RSP from Monday’s closing levels.
(I had discussed why the TD Sell Setup last week likely wouldn’t have much importance, and for those that missed that, it might be informative to review the notes from 5/1-2.)
Invesco S&P 500 Equal Weight ETF
RSP has outperformed SPY since December, but has proven choppy of late
As shown below, for those looking for a broad-based market rally (which might take the form of meaningful outperformance in RSP vs. SPY), this still largely hasn’t come to fruition.
RSP began to turn up relative to SPY last December (2024) and started to break out in mid-February as the US stock market began to weaken.
This outperformance was largely attributed to the weakening of U.S. technology stocks. However, Technology has been the leader on the comeback since 4/7/25.
Thus, while Small-caps have outperformed the Equal-weighted S&P since early April, they have not outperformed the “Magnificent 7”.
I expect that Large-cap Technology might still lead in showing good relative strength in the weeks to come. Thus, it might still be early to favor RSP 2.74% .
RSP/SPY
