Near-term Equity trends suffered some minor trend deterioration in both SPX and QQQ, which needs to be recouped right away to help repair recent uptrends that were violated on Tuesday’s severe downdraft. Importantly, Equal-weighted SPX maintains its bullish uptrend and has not shown any technical damage, while both SPX and QQQ look to be at key near-term areas of Fibonacci-based support. Given that multiple sector indices have recently pushed back to new highs, and the pattern of today’s decline resembles an hourly five-wave decline, which should be nearing its end, I don’t find this decline too troubling just yet. Furthermore, this recent weakness directly coincides with the normal seasonal weakness that happens during Mid-Term January. Meanwhile, Gold and Silver continue to press higher along with Treasury yields, while the US Dollar began to roll over and likely has begun its descent back to monthly lows. Overall, outside of the “Magnificent 7,” U.S. equity markets have actually been in fairly good shape in recent months, and appear better than this time one year ago, when breadth was in a worse position. My thinking is that a bottoming in “Mag 7” should be key towards helping the broader market start to recover, and this weekend’s news, despite being unexpected, likely proves short-lived, not dissimilar from last April.
A few key points are important when assessing the seriousness of Tuesday’s selloff.
- A two-day decline normally does not create enough technical damage to suggest a larger selloff is underway. This is certainly the case when viewing the Equal-weighted S&P 500, which remains trending higher and has not violated its uptrend.
- Tuesday’s setback doesn’t take away from the positive developments of DJ Transportation Avg, Ishares Small-cap ETF, SPDR Mid-cap 400 ETF Trust, Equal-weighted S&P 500, and DJIA, all having pushed back to new all-time high territory.
- Market breadth has been steadily going higher in recent weeks, which is a refreshing change from how 2025 began, one year ago today.
- Elliott-wave patterns don’t seem too bearish, and one can clearly make out (what looks to be) a five-wave decline from the 1/15/26 peaks. The intermediate-term trend looks to require a rally back to new highs to complete the structure off the November 2025 lows.
- Seasonality normally shows weaker-than-average prices in the middle part of January during Midterm election years, which has largely occurred right on schedule. (The seasonal pattern, if it were to continue this year, should bottom and rally into February.)
- No evidence of larger trend deterioration has occurred in the US Equity indices, and uptrends remain very much intact.
- Price has pulled back to nearly the 50% retracement area of the rally from December in ^SPX, which should represent appealing short-term support.
- Cycles look to peak in late February, not mid-January, in my view. I expect to see Technology push back to new highs, which should allow for a better risk/reward opportunity to trim gains vs. thinking that now is the right time.
- DeMark indicators on ^SPX and QQQ 0.13% don’t show any evidence of exhaustion on weekly or monthly charts, which would suggest our recent mid-January peak was all that important.
Overall, I think it’s wise to monitor closely what happens throughout the balance of the week, but it’s difficult using cycles, Wave theory, DeMark, Elliott-wave, or traditional technical structure to make much of the two-day decline from last week as being all that important just yet.
As shown below, Tuesday’s open gap likely represented “wave 3” from this recent decline (of C), and now the bounce attempt into Tuesday mid-day gave way to weakness back to new lows of the session.
There looks to be a lot of support between 6720 near December 2025 lows and 6752, approximating the 50% retracement area of the rally from last November’s lows. My expectation is that prices will likely hold this area of possible support and then turn higher back to new highs. Only if December lows are broken across ^SPX, QQQ 0.13% , RSP -0.10% , and DJIA 0.58% will it suggest it might be right to have a bit more of a negative stance.
Near-term, I am expecting a low over the next three days of this week and bounce into February. Any early weakness that stabilizes and pushes higher to close positive should be seen as important and bullish.
S&P 500 Index
Equal-weighted SPX has suffered hardly any damage on this decline
At present, it’s important to let today’s RSP -0.10% move tell the technical story about the amount of trend damage given this recent decline, because at present, this looks non-existent.
As daily charts show on RSP, following a two-day decline, the price has pulled back to a level just above prior highs from December 2025, which is thought to be support.
Additionally, the uptrend from late November lies near $195, which also has not been broken on this pullback.
Given the strength lately in Industrials, Financials, Healthcare, along with Small and mid-caps, it’s hard to make a bearish case regarding the Equal-weighted ^SPX ETF from Invesco (RSP -0.10% ), which hasn’t even broken down.
Invesco S&P 500 Equal Weight ETF
Both Gold and Silver spike back to new all-time highs again; Gold looks increasingly able to reach 5000
Gold and Silver have broken out again and still look premature to peak out, which likely does not happen until February. Following four days of minor consolidation, today’s rally in Gold back to new highs (Shown here) likely gets up to 4992-5k or above near 5093 before peaking out.
Counter-trend tools suggest that Gold might initially attempt to peak next week, but the main area on the monthly charts seems to point to February. Overall, given such a strong move in momentum in recent months, it’s difficult at this time to expect that any selloff would turn out to be more than what was seen last October when the Metals briefly peaked and sold off but then rallied back.
I’m finding it difficult trend-wise to make the strong case for selling the metals, and for now, I still feel like watching trends carefully and utilizing a rising stop price might make more sense than attempting to sell into strength. (GC_F).
Gold Futures
Bank of America’s Global Fund Manager Survey showed the highest sentiment since 2021
I think it’s right to mention that Sentiment remains more bullish now than a few months ago, given the resilience of Equity markets in having shaken off the government shutdown. As shown below, this monthly Fund Manager survey showed Investor sentiment (they measure using growth expectations, Cash levels, and Equity allocation).
This has just pressed up above 2024 levels to the highest levels in roughly five years.
Interestingly enough, this has also mirrored the widening out of the AAII Bulls-Bears spread, also, which, as of last Thursday, 1/15/26, showed a Bullish percentage reading of +49.50, while the Bearish percentage reading was 28.20, making a net bullish reading of over 21 points.
Normally, I find that when AAII bearish sentiment drops under 20% or the net difference between the Bulls and Bears exceeds 30, then it’s “time to pay attention”.
However, on evidence of the BofA poll reaching 2021 peaks and/or other sentiment gauges widening out into February on a snapback rally, this would be something to pay closer attention to. At present, I view sentiment as being more optimistic than it was over the last nine months of 2025. However, it’s not at levels that would suggest blatant speculation and/or complacency.
