Short-term trends remain bullish while market breadth continues to expand, given the recent improvement in Equal-weighted S&P 500. It’s important that market participation is expanding after this push back to new all-time highs for SPX, and helps to establish some credibility to this move, which was lacking in both breadth and momentum back in May. Given the broadening out in the US Stock market over the last week, my view is that the push to new all-time highs will prove difficult to fade right away. Bond yields could very well diverge from the US Dollar’s weakness and bounce into mid-July as the Yield curve starts to re-steepen. Meanwhile, precious metals likely begin to turn back up in July, and Gold should push back to new all-time highs. Overall, I don’t sense that markets show much stalling out until after the Independence Day holiday, and even on a minor dip post 7/4, it’s likely that July should mirror the historically bullish seasonality trend in post-Election years that’s been working thus far in 2025. This calls for July strength in Equities, which might not show much consolidation until the month of August, which might prove more important.
The most important technical developments this week seem to revolve around three key themes:
- Treasury yields are starting to stabilize and turn higher.
- Momentum stocks are taking a breather after the steep runup.
- Continued broadening out in other sectors outside of Technology.
Initially, it’s right to expect that both the DJIA -0.80% and the Equal-weighted ^SPX can test all-time highs into early next week as both have rallied to within striking distance.
Interestingly enough, those levels of $45,073 for DJIA -0.80% and 188.16 for RSP 0.41% might prove to be temporarily important as resistance, given that SPY looks to have 2-3 more days of possible rally before a minor stalling out occurs.
Note, as discussed in recent days, I don’t suspect much selling pressure in July, and this might materialize like a 3-5 day period of weakness ahead of a push higher into August.
Overall, there aren’t many reasons to suspect Equities weaken materially in July given the broad-based expansion in market breadth and less than bullish sentiment. However, ^SPX’s Relative Strength index (RSI) is now over 70 on daily charts, and a pause looks overdue. Based on the combination of DeMark’s exhaustion indicators along with short-term cycles, the most likely window for July for such a pause could arrive between July 8-July 16th.
Thereafter, I suspect a sharp rally back to monthly highs into August.
S&P 500 SPDR – SPY
Seasonality hasn’t been kind to momentum stocks in July in recent years
The early week sharp drawdown as July got underway was a reminder to many investors who recall what happened to many high momentum stocks last July, which coincided with a Summer peak in the Technology sector.
While my work shows this to be premature for Technology this July, it’s worth noting that Goldman Sachs’ US High Beta Momentum Index has been negative for the last five Julys and has been lower in seven of the last 10 years.
As can be seen below, July along with December are months where this mean reversion has occurred the most in the last 10 years. The rebalancing which normally happens as markets head into the 2nd half of the year as well as preparing for a new year certainly lines up with this weakness.
Overall, while I suspect a positive July this year in 2025, I can’t rule out some downward mean reversion in some of the highest momentum names which have gotten stretched in recent months. Investors should pay close attention if there appears to be some weakness in stocks that have gotten overbought and are now rolling over to violate ongoing uptrends. At present, I don’t suspect this will prove to affect all of Technology. However, recent history suggests it’s wise to pay attention during this time.
GSPRHIMO Index
July Seasonality in post-election years tends to be quite bullish
As shown below, the High Beta momentum index by Goldman Sachs (GSPRHIMO Index- Bloomberg) has pulled back to challenge its uptrend after a sharp rally from March lows.
One can certainly count five impulsive waves higher from March into June, making a correction a possibility in momentum stocks.
However, more evidence of trend damage needs to occur, and I suspect that next week should shed some light in this regard. From a bullish perspective, some stabilization is needed right away followed by a sharp push back to new highs. If this fails to occur, and or just a mild bounce happens before further damage, then some additional weakness in this momentum index might materialize into mid-July. Thereafter, I suspect a push back to new highs gets underway.
Note that MACD (Moving Average Convergence Divergence), the technical momentum indicator shown under this chart, has officially crossed its signal line and has turned bearish. Thus, some immediate ability to rally will be important towards helping momentum to improve.
GSPRHIMO Index
US Treasury yields could follow European sovereign yields in turning higher in the short run
2nd Half 2025 could kick off with a Treasury selloff following June’s best performance in Treasuries since February, with cooler-than-expected inflation and also a rise in continuing claims that have raised the probability of rate cuts this year.
Fiscal concerns are on the front burner given the Tax bill, and we’ve suddenly seen short-term technical breakouts in both Gilt and German Bund yields. Germany’s yields seem to be following the large 30-yr Gilt rise, as concerns also are mounting about the UK’s fiscal stance, with uncertainty surrounding Chancellor Rachel Reeves’ future.
Thus, it’s fair to say markets are recalibrating their view of the term premium, and I expect that US Yields likely follow the path of UK and German Yields into mid-to-late July. German bund yields daily chart shown below after their early week breakout which should drive Bund yields to 2.71, and above that to 2.80-2.85%.
TNX meanwhile has key resistance at 4.35%, but this bond move across the globe looks important and could persist in the near-term. Initially, a bounce up to 4.35% looks likely for the US 10-year Treasury index (^TNX). However, a daily close above 4.35% argues for a push to challenge and potentially exceed May peaks at 4.627%.
Overall, I don’t suspect that such a move will necessarily be bearish for US stocks, but if ^TNX exceeds 4.35% as ^SPX or QQQ 2.65% are starting to roll over, then there could be a selloff for both Stocks and bonds in the short run.
My intermediate-term cycle composite shows weakness in yields into the fall, but in the short run, a counter-trend bounce in yields has begun to look increasingly likely.
US Government Bonds 10 YR Yield
Solar stocks could start a more meaningful bounce
Solar stocks look appealing here given the Senate’s removal of a Wind and Solar excise tax from its version of the pending tax bill. FSLR 3.98% is a favorite of mine within Solar Energy and far more technically appealing than either ENPH -0.56% or SEDG 0.87% .
Today’s breakout of the minor 2-month consolidation is very bullish for this stock after the runup in May, and bodes well for continued gains. Technically speaking, I expect FSLR might advance to 212, then 234, and FSLR’s breakout has also coincided with a breakout in TAN 3.92% , the Invesco Solar ETF.
I am adding FSLR to my UPTICKS stock list based on Wednesday’s closing price of $170.52. I expect to see a push up to challenge and exceed May’s highs at $198.87 in the near future.
First Solar, Inc.
