Short-term trends in US Equities remain bullish, and the minor consolidation this week in US Equity indices has not proven severe enough to cause any technical deterioration in the rally from early April lows. Despite the four-day downtrend for most US indices, I remain encouraged about the technical progress and structural improvement that has occurred in SPX over the last six weeks, and feel that an upcoming move back to challenge February peaks should be forthcoming. Precious metals have begun to turn back higher, and the bond yield breakout is likely to prove short-lived into next week before yields start to reverse course and trend lower to join the US Dollar’s decline. I favor Industrials, Financials, Technology, and Utilities, while also favoring owning precious metals and Treasuries. Additionally, Emerging markets have appeal given the drop in the US Dollar and should be overweighted for further upside progress in the months ahead.
Friday’s tariff announcement caught the market off-guard today unfortunately, spoiling the plans for a relaxing start to the weekend. However ^SPX, QQQ 0.89% , and RSP 0.62% all closed higher than their opening prints from Friday’s open which was somewhat comforting.
SPX got down to 5800 and closed slightly above on a close. However, there is no high conviction that this pullback is complete, given the gap-down on Friday. While the bounce was encouraging, the minor downtrend from this past Monday’s peak is still in place. Furthermore, the gap from early May has not yet been filled, but could do so as of next Tuesday, ahead of a rally back above February 19th highs.
Interestingly enough, but not surprisingly, quite a few of the large-cap Technology stocks have pulled back to fill their own respective gaps from early May, not dissimilar to the S&P 500. While not all gaps always necessitate being filled, when this does happen, they often do act as important support for a short-term decline.
In this instance, I suspect that it’s tough to rule out a move to 5720 for SPX or slightly below that would test 5/8/25 intra-day highs, and might result in QQQ getting to 501.48 to test 5/12 lows before the rebound to new highs can get underway.
However, in the bigger picture, the key takeaway is that my technicals don’t view this week’s pullback to be the start of a larger decline. Whether prices have another 1-2 days of weakness, or some announcement comes out over the weekend that might reverse some of Friday’s perceived tariff increase, my view is that the uptrend from April should not be violated in SPX nor QQQ and then should begin turning higher.
Key reasons for thinking this is just a minor decline and not the start of a big selloff:
- Technology sector has not broken down, but has pulled back to fill a minor gap from early May.
- Breadth and volume are not hugely negative on this selloff. Friday’s Advance/Decline was just barely negative, indicating a lack of selling pressure, while Equal-weighted S&P was down less than -0.50%. This is much different from early April’s Liberation Day announcement in how the market is reacting to Friday’s tariff announcement.
- Elliott-wave structure doesn’t show this to be a five-wave decline from 2/19th highs, but merely a corrective pattern that should find support and turn back towards highs.
- DeMark-wise, weekly TD Sequential 13 exhaustion signals were never triggered in SPX, nor have weekly TD Sell Setups been completed.
- SPX Cycle composite seems to show a push up into mid-June as part of a larger rally into August. While 5/19 was important as a three-month anniversary to 2/19, I don’t expect this to be a meaningful top.
- Uptrends have not been violated from the early April lows.
- Sentiment remains largely pessimistic when eyeing Hedge fund and CTA positioning, while Retail sentiment is largely neutral, not bullish.
Thus, it should be right to be long US stocks, expecting a push higher up to 6147 into mid-June.
S&P 500 Index
Apple stock remains a laggard, and its trading range is intact
Given the tariff announcement from the Administration today, AAPL 0.49% fell 3% and fell to near the lows of its recent trading range.
As shown below, the stock remains down 25% from its December 2024 peaks. It’s been a laggard within Technology this year and will need to eclipse $214.50 to jumpstart its rally back to highs.
The good news for AAPL bulls is that its selloff looks complete from December 2024 into April 2025 given its wave structure.
However, its recovery has proven choppy and uninspiring compared to the rest of the Magnificent 7 lately and will need some kind of a catalyst to jumpstart the move back higher. The pattern has been neutral and range-bound since mid-April
Overall, this isn’t bearish per se, but will need to get back up above 214.56, the peak from late April, before it can begin to trend back higher in a way that would help ^SPX given its size.
Support looks to materialize close to current levels after Friday’s decline as it has pulled back to near the bottom of this trading range. $193.25 is very important below, and I do not expect that to be broken. Overall, I believe there remain better stocks to consider within Technology at the present than AAPL and it’s important to be patient until this can begin to turn back higher above 214.56.
Apple
Coppers breakout should result in a rally to test and exceed March highs
Today’s breakout in Copper follows some good progress this week in many of the other industrial and precious metals, and should start to lead Copper higher in the weeks to come.
(I noted earlier this week that Silver had achieved a minor breakout and also that Platinum had begun a push back higher.)
Many who might be fearful of “the R-word” aka Recession, should find comfort in moves like this for Copper, as gains in “Dr. Copper” thought to be a leading indicator for Economic strength, don’t typically happen in recessionary times. During times of economic and stock market turmoil, such as 2008-9, Copper fell sharply.
However, given China’s stimulus plans, Silver has begun to act much better in recent weeks, and now Copper has broken out to the highest level in a month as of Friday.
I expect this leads back to $5.50 in COMEX Copper initially and then might scale higher to $6 into the Fall before some late-year weakness. Stocks like Freeport McMoran (FCX -0.30% ) which normally correlate well with Copper, are attractive for gains back to the $50’s in the months ahead.
Ways to play Copper outside of the futures market and FCX include COPX -1.87% , the Global X Copper Miners ETF, and CPER -0.99% , the US Copper index Fund ETV.
Copper Future
Materials sector might be on the verge of turning back higher after several years of underperformance
Interestingly enough, this week’s breakout in many commodities might spur on an eventual push back higher in the Materials sector itself, which has lagged the S&P 500 sharply in recent years.
This relative chart of the weekly ratio of the Equal-weighted Materials sector vs. Equal-weighted S&P 500 (RTM 0.32% vs RSP 0.62% ) has been falling since 2022 and has underperformed quite sharply this year, and RSPM is down -2.95% Year-to-Date through 5/22/25.
However, this might be changing as RSPM was higher by +5.86% in the last month, which is better than the +5.72% of RSP and also better than six other sectors of the major 11 that make up the S&P 500.
As shown below, two weekly DeMark-related buy signals are now present on the ratio of Materials vs. S&P 500 in Equal-weighted terms. (TD Sequential and TD Combo)
While these signals have not been properly confirmed yet, they are in place, and it’s thought that a bounce in Materials in relative terms could be likely as Commodity prices start to spike higher.
I’ll be on the lookout for any evidence of some better relative strength in some of the sub-sectors that make up Materials. For now, this looks like an early warning sign about a coming reversal back higher in relative terms.
RSPM/RSP
