Note, I’ll be out of the office and will return on 06/17. There will be no video or notes during this time. Thank you for your understanding.
Short-term trends in US Equities remain bullish and, following last week’s breakout, now lie within striking distance of all-time highs. While a rally over February peaks should happen this Summer, my thoughts are that the next week could prove choppy and allow for some consolidation ahead of a move back to all-time highs. This would gel with weak seasonality trends for June, while breadth and momentum have slowed in recent weeks. Meanwhile, the US Dollar has begun to move sharply lower, while Treasury yields have stabilized in the short run. Additionally, precious metals, Emerging markets, and commodities are all areas of near-term focus and can likely work well in the weeks/months ahead, given a falling US Dollar. Overall, a push up to between 6050-6150 is likely for SPX, while QQQ should rally to 540 before some minor stalling out.
Thursday’s recovery brings ^SPX and QQQ 2.65% even closer to areas thought to be important heading into next week. Similar to prior days’ comments, trends have not shown evidence of turning down, and technical trends remain bullish and are still pointed higher.
However, charts of both MAGS 3.21% (Roundhill Magnificent 7 ETF) along with the VanEck Semiconductor ETF (SMH 3.98% ) are now within possibly one trading day of showing multiple DeMark counts on different timeframes.
In the case of SMH, we see that this Semiconductor ETF could have strong overhead resistance between $269.50-$270, lining up with January 2025 peaks.
I am expecting that SMH likely stalls out next week at this level, and it’s right to expect some strong resistance near 270.
Note, SMH might generate both daily and weekly exhaustion signals by next Monday, making former peaks more important as a source of potential strong resistance.
When scanning the top performing stocks within SOX (Philadelphia Semiconductor index) over the past month, 4 of the 5 stocks: NVDA 2.29% , MU 7.80% , TSM 3.50% , and KLAC 3.61% have the potential to show daily and/or weekly exhaustion signals by next week.
Thus, Semiconductor stocks look due for a pause following this sharp rally. However, any evidence of weakness in the next week likely would represent an excellent opportunity to buy dips, as SMH, shown below, would be quite attractive technically at a support zone from $246-$250.
Vaneck Semiconductor ETF – SMH
RSP looks very close to turning back higher vs. SPY
Interestingly enough, the relative relationship of RSP 0.41% to SPY 1.51% (Equal-weighted S&P 500 vs. Cap-weighted S&P 500) has now neared a strong area of support, which could allow for a relative bounce to unfold in RSP 0.41% .
Thus, given Technology’s weighting in SPY, this largely suggests that Technology might stall out briefly in the next few days.
While this does not have to lead to Equity market weakness, it’s going to be important for sectors like Financials and Industrials to begin to show some better relative strength to “pick up the slack”.
I suspect that this likely does prove short-lived, but the combination of this daily chart below of (RSP 0.41% /SPY 1.51% ) and the chart above of SMH 3.98% looks to make a strong case for Technology slowing a bit after its rapid comeback and outperformance over the last couple of months.
RSP/SPY
US Dollar breakdown looks meaningful and should lead to the Euro, Pound, and Yen all pushing higher over the next couple of months
As discussed this morning in FlashInsights, Thursday’s biggest technical development concerns the breakdown in the US Dollar index (DXY), which is heavily weighted vs. the Euro.
DXY has declined more than 8% since the end of 2024, the worst start to a year since 2005. This has become largely a consensus trade, and sentiment is starting to get very negative on DXY. While this might lessen the extent to which the US Dollar could fall, the risk is that this selling pressure could prove self-reinforcing if large investors continue to hedge more of their Dollar exposure. This move directly plays into the Administration’s playbook, as the cost of imports is raised and exports are cheapened in a way that can help the Deficit.
Overall, despite bearish positioning increasing on the US Dollar, I still expect a pullback to the mid-90s over the next 2-3 months. This could allow for a move to 94-95 on DXY before some stabilization and a bounce into year-end.
U.S. Dollar Index
USDJPY looks to be close to turning down to break its large Head and Shoulders pattern
The Japanese Yen has lagged the move in the Euro of late but looks to be close to playing catch-up in the weeks to come.
Two areas stand out as having importance on the downside which look increasingly likely to be tested in the weeks to come: 142, and under that level lies 139.88.
A violation of the first level should bring about a rapid decline to test and likely break 139.88 in my view.
This could lead down to 136 before USDJPY stabilizes and attempts to rally.
Additionally, targets on EURUSD look to materialize initially at 1.20 while GBPUSD could reach 1.42 before much resistance sets in.
U.S. Dollar/Japanese Yen
EEM looks to have begun turning up sharply vs. Equal-weighted S&P 500
Emerging market ETF (EEM 1.07% ) looks like an appealing choice for those seeking diversification, as the US Dollar decline has been driving outperformance in EEM vs. the US stock market for most of 2025.
While EEM 1.07% , similar to SPY 1.51% , might show some brief stalling out next week if/when it reaches $49, similar to 606 on SPY 1.51% , or 540 on QQQ 2.65% , it’s right to expect outperformance in EEM 1.07% vs. RSP 0.41% over the next few months.
Markets like Russia, Chile, Argentina (still a Standalone market but might be reclassified back to emerging market status within the next few weeks by MSCI) have all shown some strong comeback in recent months.
However, it’s Mexico, China, and India that still look more appealing technically.
EEM’s relative breakout vs. the equal-weighted S&P 500 happened three months ago, and has begun to accelerate this month, directly coinciding with a declining US Dollar.
Overall, EEM makes sense technically given the uptick in momentum and relative strength, coupled with thoughts of a prolonged slump in the US Dollar in the next few months. While $49 might hold as short-term resistance, I expect an eventual push back to the mid-$50s for EEM.
EEM/RSP
