Category: Newsletter

As markets close the week after setting fresh all-time highs, the near-term outlook remains cautiously constructive but demands more tactical positioning. Earnings season is ramping up, and early reports from sectors like consumer staples, airlines, and semiconductors have reinforced the bullish narrative, helping propel the S&P 500 to new records. However, technical indicators, including stretched RSI levels and flattening MACD histograms, signal that short-term momentum could reach exhaustion levels, particularly in mega-cap growth stocks.

The S&P 500 closed the week in positive territory, marking another strong performance near record highs. While the index briefly hit new all-time levels midweek, the rally lost some steam on Friday as investors grew cautious ahead of key inflation data and Trump's most recent tariff announcements. However, volatility remained subdued despite those announcements, as complacency remains high despite stretched valuations and upcoming catalysts.

Markets kicked off the second half of 2025 with a strong finish to Q2, propelled by easing geopolitical fears, falling oil prices, and a reaffirmation of the Fed’s dovish tone. The S&P 500 rose 3.4% in the final week of June to close at new record highs.

The S&P 500 and the Nasdaq both set all-time highs this week. This feat seems remarkable given the barrage of negative headlines, geopolitical risks, and a Federal Reserve intent on not cutting rates. However, the bulls remain decisively in control of the market as it closed above the 6100 level amid a backdrop of weakening economic data, dovish undertones from the Federal Reserve, and continued strength in mega-cap tech. Despite some pockets of sector underperformance, key technical indicators suggest bullish momentum remains intact, but with caveats beneath the surface.

The market continued to trade in a back-and-forth pattern this week as it consolidated recent gains. Negative news headlines from the ongoing Iran-Israel conflict continue to push and pull traders daily. Notably, the market held support at the 20-DMA, keeping the bullish trend intact. However, the market did break below the "rising wedge" pattern, increasing the potential for a further consolidation to work off the current overbought conditions.

The market's bullish trend continued this week, and it is rapidly approaching all-time highs. However, an Israeli strike on Iran early Friday morning sent stocks tumbling at the open, but as of midday, as I am writing this report, most of the initial decline has fully recovered. We noted that a correction or consolidation process is needed to work off some short-term overbought conditions. But, as seen on Friday, any pullback is quickly bought by investors chasing the market in the near term.

Despite a weakening unemployment report, a spat between President Trump and Elon Musk, a resurgence in the Ukraine/Russia conflict, and remaining tariff uncertainty between China, Europe, and the U.S., the markets continued their bullish ways this past week. Notably, the market broke out of the ongoing consolidation process that has been in place since May 12th. The good news is that bullish breakouts confirm bullish momentum and suggest markets will trade higher into the next resistance level. That next resistance level is at 6100, the previous topping process before the March and April decline.

Most notably, this past week was the successful test of the 200-DMA. The pullback to that previous broken resistance level and subsequent bounce highly suggests that the April correction is complete and that market control returns to the Bulls. As such, there is very little resistance between current levels and all-time highs. However, as noted last week, with the markets still overbought on a momentum basis, further consolidation will be unsurprising before an advance to new highs occurs. With the MACD sell signal triggered and money flows declining, another test of the 200-DMA next week would be unsurprising.

Several times this past week, we discussed that the market was due for a corrective pullback after reaching more overbought conditions. On Friday, the market gave way early in the morning on fresh comments by President Trump instituting 25% tariffs on Apple (AAPL) on any product not manufactured in the U.S. and 50% tariffs on the EU, as trade talks are not going well. As is always the case, amid a bull run, sellers are still unwilling to sell over fear of "missing out" on rising asset prices. It takes some "event" to bring sellers into the market, which we saw early on Friday.