Near-term and Intermediate-term technical trends remain bullish for US Equities and arguably should still help SPX push higher as breadth continues to expand. Meanwhile, DJIA and Equal-weighted SPX are both very close to hitting new all-time highs, which might occur over the next week. Technology’s strength has helped to drive recent performance and has solidified this sector as being the best performing out of all major S&P sectors on a 1-week, 1-month, 3-month, and 6-month basis. However, the strong relative strength in other sectors like Financials and Industrials has helped to add some appeal to this rally over the last month, and the broadening out helps to add conviction to its durability. Despite the minor bounce in both Treasury yields and the US Dollar in recent weeks, no deterioration has happened to risk assets, and sentiment has not yet become bullish despite a 31% SPX rally in the last 16 weeks off the early April lows. Overall, it still seems right to favor that this rally can continue into August before some consolidation gets underway, which gels with post-election year seasonality.
A few points look prudent to discuss at the following juncture:
^SPX is now higher by 31% off the April lows in the last 16 weeks since the 4/7/25 intra-day low.
Breadth figures are continuing to lift following an early July slowdown. There are now 55% of all Russell 3000 stocks above their respective 200-day moving average, which marks the highest levels since February.
Sentiment continues to show a neutral bias and remains far from speculative or “Uber-optimistic” despite the rally in Meme stocks lately. Recent Bank of America Global Portfolio Manager surveys and AAII data both show sentiment to be Neutral.
Near-term momentum indicators have lifted to overbought levels on daily charts, but are not overbought on weekly or monthly charts.
Seasonality and cycles start to show evidence of peaking in mid-August of this year but still look to be three weeks away from when markets might peak.
DeMark indicators also look early by roughly 5 weeks to show any exhaustion at a minimum, per QQQ’s weekly charts by Symbolik.
Defensive positioning starting? There has been some recent evidence of Consumer Staples, Telecomm, Utilities, and Healthcare strength this past week which could be argued might mark the beginning of Defensive strength. (As mentioned earlier this week, I don’t find the Utilities strength all that defensive.)
Long-term interest rates and the US Dollar have been slowly rallying since early July, and that looks to continue over the next couple of weeks. I see USDJPY potentially rising to 152 before peaking and falling to 136.
Precious metals might pause their rally as the US Dollar and rates lift in the next two weeks. However, I view that as a buying opportunity for a strong push higher between August and October.
From my perspective, I view the ongoing rally as being a good thing, not a bad thing, technically as the market has been growing stronger, which helps momentum and breadth to turn more and more positive. While I fear that an “eventual” lifting of sentiment to optimistic levels and more rampant overbought momentum signals coupled with DeMark-based exhaustion on weekly charts should eventually be an issue for markets, I don’t feel that Equity indices are all that vulnerable just yet in the near-term.
The three things to watch carefully over the next month concern the following:
- The Magnificent 7 continue higher and hold off on stalling out and/or rolling over, which would be a negative for momentum. This would require MAGS -0.22% to move to new highs.
- How high can interest rates rise on the long-end? I expect that a push back to new monthly highs might occur in August. However, this might also result in Equity indices being spooked if/when May peaks are surpassed. Ultimately, I don’t see a rate rise lasting too much longer and should allow for a pullback under this Spring’s lows in the next few months.
- How much will Defensive positioning start to grow? This past week we’ve seen some meaningful rallies out of some formerly hard hit Healthcare, Consumer Staples and Telecomm names. While this doesn’t necessarily support the notion that Defensive issues are outperforming all other areas of the market on a monthly or 3-month basis, it does look to be starting.
For now, US Equity markets still look healthy and have improved in terms of breadth since the beginning of July. As shown below, Technology, Industrials, Consumer Discretionary, Materials, and Financials have all enjoyed superb strength over the last month.
However, it is interesting to note that Consumer Staples, as well as Real Estate and Utilities, have all outperformed Technology in the last week (when looking at all 11 major S&P ETFs on an Equal-weighted basis)
Thus, while the Magnificent 7 have risen, thanks to GOOGL 3.20% and AMZN -0.68% , the broader Technology group has not shown as much progress of late. This will be something to watch carefully in the weeks to come.
Invesco S&P 500 Equal Weight ETF
SPX has accelerated out of its recent base from early July, and a coming push to new highs looks likely for DJIA and RSP
^SPX in recent days has actually improved its near-term technical position after some minor stalling out in early July. The last few days of gains have actually helped breadth turn higher after a minor period of early July consolidation.
My target for 2025 is 6650, and I feel this can be achieved this year. Similar to comments in recent days, despite some evidence of a few items suggesting possible caution in August, there’s been no evidence of any technical deterioration. Signs of sharp rallies on hugely negative breadth, which break uptrends, could have some importance. For now, trends remain strongly positive and don’t seem likely to be broken, technically, before mid-August, given the cyclical projections.
S&P 500 Index
Consumer Staples show their first signs of technical strength
The chart below shows the first real evidence of strength out of the Consumer Staples space in months, as RHS -0.83% , Invesco’s Equal-weighted Consumer Staples ETF, has achieved a minor breakout this week.
RSPS has reached the highest levels in about five months this week, which has also resulted in some minor strength in the relative chart of RHS -0.83% vs RSP -1.20% .
When Consumer Staples, Utilities and REITS all begin to outperform the market over the course of a week, then it’s certainly right to start to pay attention when the rally has become extended.
This looks to have begun this week, so it’s worth paying attention to. Some favored stocks within Consumer Staples from a technical standpoint include KR -1.27% , COST -1.03% , WMT 0.45% , HSY -0.11% , and KO 0.03% , among the most liquid large-cap names.
Invesco S&P 500 Equal Weight Consumer Staples ETF
Telecomm sector has shown strength this week and looks poised to break out
Similar to thoughts on Consumer Staples, there’s also been strong performance from Telecomm for the first time in months.
Stocks like TLKGY, RDCM -2.07% , OOMA -2.38% , VDMCY, and VEON 0.85% have all shown sharp performance recently, while VZ 0.02% and T -0.31% have also achieved above-average performance.
As shown below, the S&P Telecomm index is now positioned to exceed the upper barrier of its consolidation pattern, which has been ongoing since earlier this year.
Thus, despite rates having pushed higher since early July, the Telecomm sector has suddenly come back to life. This looks interesting, and also something to monitor as markets close out the month of July.
S&P 500 Telecommunication Services Industry Group GICS Level 2 Index
USDJPY looks to be bottoming on a short-term basis and might rally to 152 before peaking and rolling back over to new lows
Overall, the Japanese Yen looks positioned to push higher over the next few weeks given signs of minor trendline breaks this week following a several day consolidation from mid-July.
Trends have proven short-term bullish since early July in USDJPY as well as the US Dollar itself, and rallies look likely into August before this begins to weaken.
My analysis shows a possible rally in the near-term to 152 in USDJPY followed by a peak and pullback down to 136.
While the intermediate-term trend for DXY along with USDJPY remains clearly bearish, factors like Elliott-wave analysis, DeMark’s indicators, and cycles show a possible near-term bounce ahead of an August/September flush back to the downside in the US Dollar.
Thus, the Yen moving lower in the next few weeks should be supportive of the NIKKEI’s recent rally, but also might result in precious metals consolidating a bit more given the strong positive correlation between the Yen and Gold.
Overall, any Yen decline into late July likely should prove short-lived into August, ahead of a rally (decline in USDJPY) which moves to 136. Following a peak in USDJPY in August, Gold should begin to accelerate and push higher to near 3800.
The daily chart below highlights my thinking on USDJPY and its likely bounce ahead of a further decline, technically speaking.
U.S. Dollar/Japanese Yen
