Near-term and intermediate-term technical trends remain bullish for US Equities, but momentum remains under pressure in the near-term, given the recent stalling out into this week’s FOMC meeting. The combination of overbought conditions coupled with a completion of DeMark-based exhaustion signals on daily charts for QQQ could still allow for some selling pressure in my view (or at a minimum, choppy trading) over the next 1-2 weeks. I don’t find the near-term risk/reward appealing this week with SPX over 6600, but SPX could very well reach 6725. Market breadth has declined in the short run (last two weeks), but Thursday’s recovery still hasn’t allowed for any technical breakdown of the most recent uptrend since early September. Given how stretched SPX has become lately, I feel that any daily close under Wednesday’s lows (9/17) (SPX 6551) should result in 3-5 days of weakness. At present, DXY and Treasury yields remain downward sloping, but have bounced a bit after this week’s FOMC rate cut. Precious and industrial metals remain attractive and lie in short-term uptrends along with Cryptocurrencies. Global developed market and Emerging market Equities remain in bullish uptrends.
I remain a bit concerned about the strong possibility of a choppy tape over the next two weeks, but Thursday’s surge certainly didn’t offer much sign of US Equities stalling out. Technology managed to power higher yet again, and along with Communication Services, has been a huge help to ^SPX this week at a time when Equal-weighted ^SPX has largely moved sideways.
As always, despite some of the recent warning signs that have cropped up, it remains essential to see that evidence of trend break before having much conviction of a possible selloff.
As seen below, after twelve days of rising off early September lows of 6360.58, ^SPX is higher by over 4% in the month of September, which largely has followed a much more bullish August than many, including myself, expected.
The important takeaway is that sector rotation allowed for different sectors to step in and buoy the market despite the waning of breadth that happened in July into early August. However, it’s been Technology snapping back, given not only Semiconductor strength, but more importantly, Tech Hardware strength, driven by the Computer Data storage names.
Overall, given Thursday’s snapback higher, I think ^SPX likely could still push up to 6700-6725, given the strength of Technology, and might be aided by NVDA 2.29% and the broader Semiconductor sub-sector within Technology rallying back.
To have a short-term bearish view, there needs to be a daily close under Wednesday’s lows of 6551, which should drive prices down to test the lower area within this uptrend. Thus, even on a minor pullback attempt, there looks to be ample support to buy dips when eyeing the uptrend channel from early September.
S&P 500 Index
New All-time highs for Russell 2000 ETF (IWM)
Thursday’s push back to new all-time highs is quite bullish for Small-caps for the next 3-4 months on an intermediate-term basis. As shown below, IWM 1.85% managed to push higher to exceed not only last year’s highs but also the peaks from late 2021.
In the short run, I believe this leads to another 2-3 weeks of Small-cap outperformance over the Equal-weighted S&P 500 before a slowdown.
However, this is a very bullish four-year base which has just been exceeded, technically speaking. This bodes well for a likely push up to $260, and can allow for near-term outperformance vs. both Equal, and Cap-weighted ^SPX in the short run.
Russell 2000 Ishares ETF – IWM
INTC, MU rallies help to extend gains for SOX
The Philadelphia Semiconductor index has managed to extend gains this week following superb price action out of names like MU 7.80% , INTC 3.42% , AMKR 3.37% , ASML 2.20% , AMAT 3.08% , and MRVL 8.19% which are all up more than 10% in the rolling five-day period.
As seen below, while momentum has gotten overbought, it’s difficult to expect any sort of immediate selling pressure given the surge in many of these names in the past week.
I expect that SOX likely could reach 6800, which lies still roughly +8% higher than current prices and would help SOX reach the upper edge of its upsloping multi-year trend channel.
Until Technology starts to weaken in some way, it makes it extraordinarily hard to consider fading either ^SPX or QQQ 2.65% , despite this being a seasonally weak time. Overall, I sense that October might prove more important in this regard than either August or September has been.
PHLX Semiconductor
AAII data bearish now for the last four weeks
The latest data from AAII Sentiment survey still shows more Bears than Bulls, despite more than a 35% rally in ^SPX in the last 21 weeks.
As seen below, while the Percentage Bulls did jump to 41.7%, surging 13.6 points in the biggest weekly jump this year, the Bears remain stubbornly high at 42.4%.
While I do sense that the “market bulls” might be coming back, I also don’t get the sense that sentiment is all that optimistic, as there still remains a higher percentage of market participants who are Bearish than bullish.
Until this starts to change, I sense that pullbacks likely prove muted and will be buying opportunities for higher prices in Q4, 2025.
