Short-term trends remain bullish, and daily momentum gauges have hit overbought levels while DeMark exhaustion could materialize using multiple methods within the next few days for SPY and QQQ. I suspect that both Equal-weighted SPX and DJIA might stall out near their own respective all-time highs over the next few trading days, and this area looks important for the market and might result in a stallout next week. However, given the strength in Technology of late, along with the broad-based participation, I’m not expecting a meaningful peak in July. Specifically, the move into Small-caps and Healthcare in the near-term looks favorable for the rally in risk assets. SPX pullbacks, if/when they occur, likely don’t materialize into anything more than 2-3% drawdowns ahead of a rally into August. One risk to keep an eye on is if interest rates start to turn higher following next week’s CPI report, but this week’s auction results largely produced solid demand on both 10, and 30-year Treasuries despite some poor indirect participation. Overall, it’s right to trust this US Equity rally until evidence of NVDA peaking occurs, given its weight within the benchmark indices, and that still appears premature.
Overall, the chart below shows a more visually important level of resistance than either the SPX or QQQ do at current levels following their push to new highs. Both Equal-weighted S&P 500 ETF (RSP -0.31% ) and the DJIA are now within striking distance of all-time highs, and this could be something to watch carefully into next week.
While a breakout to new highs coinciding with a weaker than expected CPI print would certainly be bullish, given the plethora of DeMark signals cropping up on daily timeframes of many indices, I suspect that some stalling out should materialize.
Furthermore, the period from 7/14-7/18 has been on the radar for multiple months, so I’m expecting this likely does present minor resistance next week.
At present, it’s right to pay close attention to the area near $188 for RSP, which held back in late November 2024.
Invesco S&P 500 Equal Weight ETF
Biotechnology ETF breakout looks important and might fuel Healthcare in the short run
Notably, we’ve seen a breakout in Biotech this week and meaningful technical improvement in the short run out of stocks like GILD -0.14% , AMGN 0.22% , VRTX 0.61% , ABBV 0.03% which are great technically among the large caps, even laggards like BIIB 1.71% are making meaningful movement to multi-week highs for the first time in some time.
Both IBB 0.53% and XBI 1.69% despite its reconstitution lately, have made similar breakouts.. And we’re seeing this also in short-term acceleration in some of the small cap ETFs like GNOM, HRTS, BIB and CANC. Here is the breakout in the Ishares Biotechnology ETF IBB 0.53% .
I like this Biotechnology move to carry higher and feel like this group should experience a mean-reversion bounce in July. IBB 0.53% could carry up to technical resistance near $144 initially, while XBI 1.69% might trend higher to $105.
iShares Biotechnology ETF
Healthcare could experience a solid month of outperformance within its broader downtrend vs. S&P 500
The Healthcare sector looks to be turning higher relative to ^SPX given this week’s Biotech breakouts, and I expect to see outperformance in Healthcare between now and mid-August.
Counter-trend exhaustion signals flipped to “Buys” this past week, and I suspect that Healthcare might show strength during a seasonally bullish time for this sector.
Unfortunately, the larger relative trend has been negative for Healthcare since mid-2023. Thus, while a bounce is overdue and should be underway, it’s hard to think this means anything more than just a tactical rally at this time.
Thus, on strong performance into August, one should be inclined to expect some stalling out in Healthcare following what appears to be a bottoming in this sector this week.
For those eyeing the SPDR Select Healthcare ETF (XLV -0.47% ) (not shown), I expect to see gains from $137.76 up to $143, which should represent solid overhead resistance in the downtrend from last September in XLV.
Stocks like GILD -0.14% , AMGN 0.22% , MCK -0.49% , IDXX -1.65% , SYK -3.00% , BSX -2.18% , ABBV 0.03% , ISRG -1.16% , VRTX 0.61% , WAT 0.03% , LLY 0.22% are some of my favorite in all of Healthcare on the Large-cap side. However, it pays to look at former laggards like BIIB, and MRNA which have suddenly come to life lately.
RSPH/RSP
Healthcare typically outperforms in July and November
This week’s turn higher in Healthcare could lead to outperformance in this group given historical seasonality trends as well.
As this mini table of the last five years of XLV -0.47% performance shows, the key months for Healthcare exposure seem to be July, along with November.
Expanding this history out over the last 10, 15, & 20 years tells a similar story.
In the table below, Healthcare has experienced an average return of over +3.42% over the last five July’s going back since 2020.
Given Biotech’s breakout this past week, one should give this sector a new level of focus despite its current relative downtrend in recent years.
