Near-term and intermediate-term technical trends remain bullish for US Equities, and the recent deterioration in Technology has not resulted in US Equities breaking uptrends either from 8/1 lows or from 4/7 lows. The resilience of the broader market in the face of Technology weakness is thought to be one key reason why this recent weakness is thought to represent just a minor pullback within the uptrend. However, the fact that precious metals and cryptocurrencies have also made sharp reversals back higher also looks important and bullish for risk assets at a time when Treasury yields continue to fall. If/when SPX gets under early August lows at 6212.21, it will be proper to discuss a pullback getting underway. At present, despite the bifurcation within Technology, it’s hard to say that the selloff from 8/13 represents the start of a Fall correction. However, failure of Technology to make a strong comeback into mid-September, which negatively affects breadth and momentum, would likely mean the much-anticipated Fall 2025 pullback is upon us.
At present, SPX looks like a great risk/reward, even if Wednesday’s lows don’t turn out to be the low of this most recent drawdown. Given the sharp setback that has happened within the Software sector of Technology, it’s hard to take 10-20% pullbacks within a week in many Software names to claim “the bottom is in”.
Normally, some further stabilization is required that involves a possible Undercut of lows, specifically when DeMark-related exhaustion is not yet in place on daily charts.
However, there were above-average reasons why a possible bounce could have happened intra-day from levels discussed during the intra-day Flash Insights post I made earlier on Wednesday (Available instantly to those with access to the Fundstrat/FS Insight App), and I’ll try to shed some light on this below.
Specifically, the 12-day advance from 8/1 lows, which took ^SPX to new all-time highs, did not carry Equal-weighted ^SPX, nor IWM, nor DJ Transports back to new all-time highs.
However, market breadth did manage to expand on this rise from the earlier waning, which had been present from mid-July. Thus, this was a minor positive.
Moreover, the setback that has occurred this past week wasn’t thought to be too important given the relatively flat breadth levels seen over the last few days (Breadth was actually positive on Tuesday, despite the “Tech wreck”).
SPX managed to retrace 50% in both price and time of the prior rally up from early August, which normally has importance when attempting to forecast an area of support. Additionally, the use of time tends to amplify the probability of various “Fibonacci” levels working, which many tend to utilize in “price” terms only, not time.
Furthermore, given that stocks like AAPL and TSLA held up remarkably well during this recent drawdown also seems like a positive, and most of the damage seems to be isolated within the Software sector and parts of Communication Services.
As seen below, following four straight days of declining prices, ^SPX fell to levels right near Ichimoku support, which also lined up with a 50% price retracement of the prior advance, and also roughly lines up with the uptrend from late June.
While a bounce back to new highs might take a bit more time given the sharp downward momentum of late, I do not expect meaningful selling pressure to materialize given that the broader market is still holding up in good shape. Thus, for those concerned about trend failure, the one level to continue to watch carefully lines up with early August lows at approximately 6212. Until/unless this level is broken, dips should find support and begin to work their way higher into mid-September.
S&P 500 Index
Software continues to erode within Technology
Here’s a slightly different view of a chart I’ve been illustrating in recent days regarding Software weakness.
As shown below, Software began to weaken within Technology starting a few months ago, but became particularly pronounced in the last week.
Stocks like FICO, PRGS, HUBS, OS and others have all fallen more than 25% in the past three months. Many might agree that the Software sector seems far less resilient than it was last year.
This ratio of IGV vs XLK broke down and has been trending lower for the last few months. It still seems premature for Software to begin stabilizing and turning higher vs. XLK as a whole. Thus, in the days ahead, regardless of an absolute bottoming possibility of hard hit stocks like PLTR, it’s difficult to see Software as a sub-sector of Technology strengthen to the extent that it begins to outperform.
At present, it’s right to favor Tech Hardware, and also Semiconductor stocks within Technology which look more appealing than attempting to buy steep downtrends of many Software issues.
IGV/XLK
Technology gave some warning signs of stalling out in July before this week’s breakdown; Yet, this should only prove temporary
Those who utilize relative charts know that Technology had begun to stall out following the sharp move up off the April 2025 lows.
After pushing higher into July, many parts of Technology began to trend sideways and this was particularly apparent in many of the Magnificent 7 names.
However, it was this week’s breakdown in the relative ratio chart of Technology vs. SPX on an Equal-weighted basis that looks important and negative in the short run for Technology.
This breakdown will need to be recouped to have faith that Technology can lead markets into September.
Equal-weighted SPX has begun to gain traction vs. SPX, and it’s thought that Technology might face an uphill battle in the short run, until many of these Software names can begin to stabilize.
While I remain bullish on Technology as a sector and feel it demands an Overweight rating technically between now and end of year, the immediate snapback might take some time to stabilize that could result in further near-term underperformance into next week before Technology starts to rally.
This relative chart below (RSPT/RSP) helps to put this week’s Technology underperformance into perspective.
RSPT/RSP
Gold and Silver should begin to “shine” as rallies carry precious and industrial metals like Silver back to new monthly highs
I think it’s wise to favor Gold and Silver at current levels, given the minor strengthening of these metals off their recent lows today.
Following a short-term downtrend after nearly three months of sideways consolidation, both Gold and Silver showed some much-needed strength today in making a constructive technical breakout in trading on Wednesday.
I feel this likely marks the start of a push back to new all-time highs for Gold, and should lead Silver to rally up to between $41-$42 before some kind of resistance sets in.
Gold, which is shown here on an hourly chart of Spot Gold, should push higher to challenge and exceed $3452, which should lead this up to near $3800 into October.
Precious metals should begin to show some upside progress if my technical work is correct, given today’s rally.
CFDs on Gold (US$/OZ)
