Stock

The week that went by was a short trading week with just three trading days. However, the Indian equities continued to surge higher, demonstrating resilience, and the week ended on a positive note. In the week before this one, the Nifty was able to defend the 100-week MA; last week, it surged higher and closed just at the 50-week MA. The trading range got narrower; the Index oscillated in a 665.35-point range. The volatility, too, cooled off; the India Vix declined by 23.08% to 15.47. While staying largely stable with a strong underlying bias, the headline Index closed with a net weekly gain of 1023.10 points (+4.48%).

There are a few technical levels that need to be closely observed. The Nifty resisted the 100-day moving average (DMA) at 23395 before breaking out above that level. Zooming out to the weekly chart, the Nifty has closed at the 50-week MA, currently placed at 23885. This point and the 200-DMA at 24050 create an important resistance zone for the Nifty. While there is room for Nifty to move higher towards the 24000 level, there are strong possibilities of the markets consolidating between the 23900 and 24000 levels. While no major drawdowns are expected, there is a high chance that the upmove may at least take a breather around this level. It is important to watch Nifty’s behavior against this level.

The coming week may start on a stable note; the levels of 24,000 and 24,210 are likely to act as resistance points. The support will come lower at 23500 and then at 23345, which is the 20-week MA.

The weekly RSI is 53.94; it has formed a 14-period high, indicating a bullish trend. The weekly MACD has shown a positive crossover; it is now bullish and trades above its signal line.

The pattern analysis on the weekly chart shows that the Nifty has returned to the important level of the 50-week moving average, which it previously violated when it initiated its corrective move. This level and the 200-DMA placed at a short distance at 24050 are likely to offer resistance. This would mean that the markets are entering a major resistance zone; unless 24050 is taken out on the upside, we can expect the markets to consolidate, showing minor retracements over the coming days.

Overall, it is time for one to focus on protecting the gains at higher levels. While one may continue staying invested on the long side, new purchases must focus on the pockets that have shown the improvement of relative strength at lower levels and show strong signs of reversing their trend. Effective rotation into sectors that show improvement in their relative strength and protecting gains in the pockets that have run up hard would be important. A cautiously positive outlook is advised for the coming week.

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Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show the Nifty PSU Bank and Consumption sector Index has rolled inside the leading quadrant. The Commodities, Financial Services, Banknifty, Infrastructure, and Metal Index are also placed inside the leading quadrant. While the Metal Index is showing a weakening of relative momentum, these groups are likely to relatively outperform the broader Nifty 500 index.

There are no sectors inside the weakening quadrant.

The Pharma Sector Index has rolled inside the lagging quadrant. The IT index also continues to languish inside this quadrant, along with the Midcap 100 index. The  Realty and the Media Indices are also inside the lagging quadrant; however, they are seen sharply improving their relative momentum against the broader markets.

The Nifty PSE, Energy, and FMCG Indices are inside the improving quadrant; they are expected to continue improving on their relative performance over the coming week.

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Important Note: RRG charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

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Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

It was another erratic week in the stock market. There were several market-moving events sprinkled throughout this short trading week, including earnings, escalation of tariff wars, and Chairman Jerome Powell’s remarks at the Economic Club of Chicago. This extended to wild swings in the bond market as well.

We had several positive earnings from banks and Netflix, Inc. (NFLX). Others, such as UnitedHealth Group, Inc. (UNH), disappointed, sending the Dow Jones Industrial Average ($INDU) lower by 1.33%.

Chairman Powell stated that tariffs could increase inflation. This would cause economic growth to slow down and unemployment to increase. The hope is that inflation is transitory, and, after it becomes stable, the Fed can continue to focus on its dual mandate of maximum employment and price stability.

It’s an insecure time for investors, and many feel the pain. You’re probably wondering how long this pain will go on for. In an uncertain environment, the best you can do is turn to the bond market.

It’s All About Bonds

The recent wild swinging market activity can be encapsulated in the price action of Treasury yields. Since 2024, yields have been swinging up and down. In the past year, the 10-year Treasury yield has ranged from 3.60% to 4.81%, and when the range is this wide, it’s an indication of economic instability. Not to mention, economic instability could result in a weaker economy.

The daily chart of the 10-Year US Treasury Yield Index ($TNX) gives you an idea of the range of yields in the last year. More recently, the yield has risen from 3.89% to 4.59%, and has now pulled back to its 50-day simple moving average (SMA).

FIGURE 1. DAILY CHART OF 10-YEAR TREASURY YIELDS. Yields have been seeing some large up and down swings.Chart source: StockCharts.com. For educational purposes.

Generally, when stock prices fall, bond prices rise. Since bond yields move inversely to bond prices, you’d expect yields to fall. This scenario isn’t playing out. Instead, we’re seeing yields move erratically while bond prices remain suppressed. There needs to be stability in bond yields before a stock market recovery, and one way to do that is to monitor the chart of the Merrill Lynch Option Volatility Estimate, referred to as the MOVE Index ($MOVE).

The MOVE Index tracks bond volatility. Think of it as the bond counterpart to the Cboe Volatility Index ($VIX). The chart below displays the $MOVE/$VIX relationship, with the correlation between the two in the lower panel.

FIGURE 2. THE MOVE INDEX VS. VIX. A high correlation between the MOVE Index and VIX suggests interest rates and stock prices are tightly connected. A lower correlation would indicate stability in equities.Chart source: StockCharts.com. For educational purposes.

The two have been highly correlated since the end of March, which indicates that stocks and interest rates are tightly connected. This means the wild up and down swings in equities could continue. When the two are less correlated, we can expect equities to start settling down. Looking at the above chart, a correlation of 0.80 would be sufficient for signs of stability.

Both $VIX and $MOVE have come back slightly, but their correlation is at 0.93, which is relatively high.

Be sure to save both charts displayed in this article to your ChartLists. They could alert you to stability in the stock market ahead of other indicators.

The Bottom Line

Until stability returns, you could do the following:

• Stay on the sidelines and keep some dry powder.
• Invest in risk-off instruments such as gold and silver.
• Park some of your money in defensive sectors.

Equities could slide lower before stability returns. If this happens, you could pick up some growth stocks for a bargain.

An empowered investor comes out ahead after market instability. So monitor the market closely and, when the time is right, make wise investment decisions.

End-of-Week Wrap-Up

• S&P 500 down 1.50% on the week, at 5282.70, Dow Jones Industrial Average down 2.66% on the week at 39,142.23; Nasdaq Composite down 2.62% on the week at 16,286.45.
• $VIX down 21.06% on the week, closing at 29.65.
• Best performing sector for the week: Energy
• Worst performing sector for the week: Consumer Discretionary
• Top 5 Large Cap SCTR stocks: Palantir Technologies, Inc. (PLTR); Elbit Systems, Ltd. (ESLT); Anglogold Ashanti Ltd. (AU); Just Eat Takeaway.com (JTKWY); Kinross Gold Corp. (KGC)

On the Radar Next Week

• Earnings season continues with Haliburton (HAL), Tesla (TSLA), Boeing Co. (BA), International Business Machines (IBM) and others reporting.
• 30-Year Mortgage Rates
• March New Home Sales and Building Permits
• April S&P PMI
• April Consumer Sentiment
• Fed speeches from Jefferson, Harker, Kashkari, and others.

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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your personal and financial situation, or without consulting a financial professional.

Reflecting on the price action over this shortened holiday week, I’m struck by how the leadership trends have not really changed too much. We’ve observed bombed-out market breadth indicators, and the S&P 500 remains clearly below its 200-day moving average despite a strong upside swing off the early April market low.

But how much as the leadership of this market changed over the last couple weeks? I would argue that conditions remain fairly consistent over that period, and are still not overwhelmingly bullish.

Defensive Sectors Still Outperforming Offense

Here’s one of my favorite charts for analyzing offense vs. defense, a chart that holds a place of honor on my Market Misbehavior LIVE ChartList. We’re comparing the Consumer Discretionary and Consumer Staples using both cap-weighted and equal-weighted ETFs.

When the ratios are going higher, investors are favoring “things you want” over “things you need”, which implies optimism for economic growth. When the ratios slope lower, that suggests more defensive positioning as investors are skeptical of growth prospects.

We can see that the cap-weighted version of this ratio made a peak in January, while the equal-weighted version made its own top in February. Both ratios have been in a fairly consistent downtrend of lower highs and lower lows, even through last week’s sudden spike on tariff policy changes.

How bullish do I want to be when these ratios are sloping lower? Generally speaking, I’ve found that until investors start believing in the upside potential of Consumer Discretionary over the relative defense of Consumer Staples, it’s best to remain on the sidelines.

Using the RRG to Visualize Offense vs. Defense

While I often refer to relative strength ratios of sector ETFs vs. the S&P 500 index, I also enjoy leveraging the power of Relative Rotation Graphs (RRG®) to monitor a series of relative strength ratios in one simple but powerful visualization.

Here, I’m showing the 11 S&P 500 economic sectors relative to the S&P 500, and I’m highlighting Consumer Discretionary and Consumer Staples to monitor their relative positions. If you click “Animate” for this visualization, you’ll see that toward the end of 2024, offense was clearly outperforming defense. The XLY was in the Leading quadrant, the XLP was in the Lagging quadrant, and the rotations suggested a classic bull market configuration.

Fast-forward to February and March and you’ll see how Consumer Discretionary rotated into the Weakening and then Lagging quadrant. Meanwhile, Consumer Staples strengthened during that same period. At this point, the RRG is telling me defense over offense, in a classic bearish configuration.

Sticking With Groceries, Guns, and Gold

So, given the bearish leadership configuration in spite of a sudden bounce of the April market low, where can we find potential opportunities? I’ll highlight three ideas that I’ll summarize as “Groceries, Guns, and Gold.”

Playing off the “things you need” theme implied above, grocery retailer Kroger Co. (KR) has managed to pound out a fairly consistent pattern of higher highs and higher lows. With improving momentum and a new 12-month relative high this week, this is a chart continuing in a clear uptrend despite broad market weakness.  By the way, KR was one of the Top Ten Charts for April 2025 I presented with Grayson Roze!

Defense stocks like Northrop Grumman Corp. (NOC) have experienced an upside resurgence given geopolitical instability in 2025. From a technical perspective, I love how charts like NOC have rallied since mid-February, while most stocks, as well as our equity benchmarks, have been trending lower! There’s a significant resistance level to overcome around $550, but a confirmed break higher could open the door to further gains.

Gold has experienced an incredible run so far in 2025, finishing the week up 26% for the year compared to the S&P 500’s 10% loss over the same period. Similar to the chart of NOC, Newmont Corporation (NEM) is addressing a key resistance level from a major high in October 2024. But, so far in 2025, NEM has been scoring higher highs and higher lows, potentially building momentum for a break to a new all-time high.

It can be super tempting to consider the April low as “the bottom” and go all-in on growth stocks and offensive plays. But, given the lack of leadership rotation in April, I’m inclined to stick with charts that remain in strong uptrends during uncertain times.

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!

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David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

When markets get more volatile and more unstable, I get the urge to take a step back and reflect on simple assessments of trend and momentum.  Today we’ll use one of the most common technical indicators, the 200-day moving average, and discuss what this simple trend-following tool can tell us about conditions for the S&P 500 index.

Nothing Good Happens Below the 200-Day Moving Average

I’ve received a number of questions recently as to why I’m not way more bullish after the sudden rally off last Wednesday’s low.  I love to respond with Paul Tudor Jones’ famous quote, “Nothing good happens below the 200-day moving average.”

To be clear, the 200-day moving average is almost 500 points above current levels, so it would take quite a rally to achieve that price level any time soon.  But with the VIX still well above the 30 level, that means the market is expecting wide price swings and big moves could be very possible.

But generally speaking, any time I see a chart where the price is below a downward-sloping 200-day moving average, I feel comfortable making the basic assumption that the primary trend is down.  And until the SPX can regain this long-term trend barometer, I’m inclined to treat the market as “guilty until proven innocent.”

Tracking the 200-Day With the New Market Summary Page

The new and updated version of the StockCharts Market Summary page features a table of major equity indexes and includes a comparison to the 200-day moving average for each index.  I’ve sorted today’s table in descending order based on this metric, which allows us to compare the relative position of different indexes and focus on which areas of the equity market are showing real strength.

We can see that only the Dow Utilities remain above the 200-day moving average, even with the strong bounce we’ve observed over the last week.  The S&P 500 is about 8% below its 200-day moving average, and for the Nasdaq Composite it’s over 11%.  So this basically implies that the S&P could see another 8% rally, drawing in all sorts of investors, yet still remain in a bearish phase based on its position relative to the 200-day.

Three Stocks Facing a Crucial Test This Week

One chart I’m watching closely this week involves three key growth stocks that are actually very near their own 200-day moving average.  If these Magnificent 7 stocks have enough upside momentum to power through the 200-day, then there could definitely be hope for the S&P 500 and Nasdaq to follow suit in the coming weeks.  

Note in the top panel how Meta Platforms (META) powered above the 200-day last Wednesday after the announcement of a 90-day pause in tariffs.  But after closing above the 200-day for that one day, META broke right back below the next day.  META has closed lower every trading day since that breakout.

Neither Amazon.com (AMZN) nor Tesla (TSLA) reached their own 200-day on last Wednesday’s rally, and both are now rapidly approaching their lows for 2025.  And if mega cap growth stocks like META, AMZN, and TSLA are unable to power above their 200-day moving averages, why should we expect our growth-dominated benchmarks to do the same?

With a flurry of news headlines every trading day, and an earnings season that could paint a disturbing picture of lowered expectations for economic growth and consumer sentiment, I feel that there is more downside to be had before the great bear market of 2025 is completed.  But instead of trying to predict the future, I choose to simply follow the trends.  And based on the shape of the 200-day moving average for these important charts, the primary trend appears to still be down.

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

With so many articles and videos on popular media channels advising you not to look at your 401(k) during this market downturn, avoiding taking the other side is tough. If you are close to retirement or retired, isn’t a market downturn a good excuse to look at your 401(k)? After all, you’ve stashed away hard-earned money to enjoy those big post-retirement plans.

The stock market is well-known for its uncanny ability to throw you surprises, but the recent headline-driven price action is especially difficult to navigate. While it’s true that, over the longer term, the broader market tends to trend higher, if you’re not in a position to patiently wait for that to occur, you may want to reevaluate your portfolio sooner rather than later. The “set-it-and-forget-it” strategy can work at times but not always.

Is the Stock Market Headed Lower?

Let’s look at where the overall stock market stands by analyzing the S&P 500 ($SPX), starting with the daily chart.

FIGURE 1. DAILY CHART OF S&P 500. After falling below its 200-day moving average, the S&P 500 is struggling to remain above its 5400 level. Will it hold? Chart source: StockCharts.com. For educational purposes.

It’s clear the S&P 500 is trending lower and that the 50-day simple moving average (SMA) has crossed below the 200-day SMA, further confirming the downward trend of the index. After reaching a high of 6147.43 on February 19, 2025, $SPX started its decline, falling below its 50-day SMA and then its 200-day SMA.

Although the index tried to bounce back to its 200-day SMA, it failed to break above it and fell to a low of 4835.04 on April 7, 2025. Since then, the S&P 500 has been trying to bounce back. It filled the April 4 down gap, but has been stalling around the 5400 level since then, on lower volume. It’s almost as if investors are sitting on the sidelines for the next tariff-related news which could send the S&P 500 higher or lower.

Going back, the 5400 was a support level for the September 2024 lows, between the end of July and early August, and in mid-June. There have also been price gaps at this level during those times. The chart of the S&P 500 has a horizontal line overlay at the 5400 level. This could act as a resistance level for a while, or the index could soar above it, in which case this level could act as a support level.

Save the chart in one of your ChartLists and watch how the price action unfolds for the next few weeks.

Where’s the Breadth?

It’s worth monitoring the Bullish Percent Index (BPI) of the S&P 500. The chart below displays the S&P 500 BPI ($BPSPX) in the top panel and $SPX in the bottom panel.

FIGURE 2. BULLISH PERCENT INDEX FOR THE S&P 500. The $BPSPX recovered after falling below 12.5. Even a move over 50 should be eyed with caution. Chart source: StockCharts.com. For educational purposes.

The recent slide in the S&P 500 took the $BPSPX to well below 12.5. It has reversed and is above 30, which is encouraging. A rise above 50 is bullish but, as you can see in the chart, the last time $BPSPX crossed above 50 (dashed blue vertical lines), it turned back lower, only to start its descent to the lowest level in the past year. Save your excitement until the $BPSPX is over 50 and a turnaround in the $SPX is in place.

This could take a while, which is why, if you’re close to retirement or already retired, you may have to consider selling the rip, or if the situation turns bullish, buy the dip. It may be time to unwind some positions, so evaluate your portfolio and make decisions that are aligned with your lofty retirement plans.

So, heck yeah! Look at your 401(k) now!

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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Moving average strategy, trend trading, and multi-timeframe analysis are essential tools for traders. In this video, Joe demonstrates how to use two key moving averages to determine if a stock is in an uptrend, downtrend, or sideways phase. He then expands on applying this concept across multiple timeframes to gain a significant edge when trading pullbacks.

In addition, Joe provides insights into the current state of commodities, highlighting areas showing signs of improvement, and covers major indices. Finally, he addresses viewer-submitted symbol requests, including LMT, BABA, and more, offering his technical analysis on each.

The video premiered on April 16, 2025. Click this link to watch on Joe’s dedicated page.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

If last weekend’s tech tariff exemptions teach us anything, it’s this: trying to make near-term market forecasts based on tariff assumptions is a fool’s errand.

But that leaves a big question for active investors near or in retirement: How do you make smart decisions when the market’s running on chaos?

On Monday morning, when all three broader U.S. stock market indexes were in the green, I pulled up the new StockCharts Market Summary page and glanced at the Keller Market Models panel to check the S&P 500’s short-term, medium-term, and long-term trend positions. According to this model’s forecast, the S&P 500, despite its short- and medium-term declines, still has its uptrend intact. If this reading of the market environment remains as is, then perhaps it’s time to look for signs of a major reversal to the upside.

But what if the bullish reversal isn’t broad-based? What if it moves by sectors instead?

One way to check is by looking at the Bullish Percent Indexes (BPIs) within the Market Summary. Here’s what it showed on Monday:

FIGURE 1. BULLISH PERCENT INDEXES.  Looking at the sectors—gold miners isn’t a sector—Consumer Staples and Utilities were the two that showed signs of hope.

The BPI is a breadth indicator that tells you the percentage of stocks (within a given index) generating Point & Figure Buy Signals.

An early warning bullish alert is triggered when the BPI is below 30% and then forms a new column of X’s (rises). On Monday, the only two sectors flashing these alerts were Consumer Staples (42.11%) and Utilities (45.16%). However, there’s a less obvious issue here. If the S&P 500’s long-term uptrend holds and eventually pulls the short- and medium-term trends higher, the leadership matters.

Defensive sectors don’t typically drive or sustain bull markets. These sectors are where investors go when they’re playing it safe, not when they are betting on growth. In contrast, sectors like Technology or Consumer Discretionary usually take the lead in a true risk-on environment.

Take a look at the Consumer Staples BPI chart.

FIGURE 2. CONSUMER STAPLES BPI. Watch how price reacts to the support (magenta lines) and resistance ranges (blue-shaded area).

Using the Consumer Staples Select Sector SPDR Fund (XLP) as a sector proxy, watch how its price reacts to key near-term resistance levels (marked by magenta lines) and the support zone (blue-shaded area). The ZigZag overlay highlights swing highs and lows, helping you spot the near-term trend: higher highs and higher lows (HH + HL) signal an uptrend, while lower highs and lower lows (LH + LL) indicate a downtrend. While the BPI for staples is flashing a bull alert, it is price action that ultimately defines the trend and provides the setup for whether to act or sit tight.

Now, switch over to the Utilities sector BPI chart, using the Utilities Select Sector SPDR Fund (XLU) as a proxy.

FIGURE 3. UTILITIES SECTOR BPI. Pay attention to the lower side of the price channel.

While XLU faces a sideways range scenario similar to XLP, utilities are managing to make lower lows. This is why I used Price Channels here, whereas, in the Consumer Staples example, I overlaid a ZigZag line—the channels can better illustrate this subtle detail.

Does this indicate relative weakness in XLU vs. XLP? Possibly, but it depends on whether XLU’s price swings can penetrate the upper channel (resistance) while staying above the lower channel (support), which it previously failed to do.

But to answer the question of relative performance, this PerfCharts shows that XLU has been outperforming XLP—and both have outpaced the S&P 500—over the last year.

FIGURE 4. COMPARING THE PERFORMANCE OF THE S&P 500, XLU, & XLP. Is the Utilities sector overbought or taking a breather?

Whether Utilities have room for further upside is largely dependent on the broader market environment, which, for now, remains unpredictable. So keep an eye on the technical levels instead.

What to Do Now

Defensive sectors don’t lead bull markets; they are the sectors where investors hide out during turbulence. Right now, the market feels less like a cycle and more like a geopolitical chess match, where the moves are unpredictable, unorthodox, and hard to price in. If you decide to go “defensive,” Consumer Staples and Utilities may make sense, but only if the price action supports your goals, and likely only as a short-term play.

That said, if you’re nearing retirement, it’s just as important to keep capital on the sidelines—ready to go on “offense” when the broader bull market kicks back in.

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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

One of my favorite market breadth indicators remained in an extreme bearish reading through the end of last week, standing in stark contrast to growing optimism after last Wednesday’s sudden spike higher.  Monday’s session saw the Bullish Percent Indexes cross above the crucial 30% level for both the S&P 500 and Nasdaq 100.  While I remain skeptical of meaningful upside without further confirmation, this bullish rotation does seem to confirm a short-term tactical rally for stocks.

Bullish Percent Index Shows Improved Breadth for S&P 500

The Bullish Percent Index uses point & figure charts to analyze the percentage of stocks in a universe that are in uptrends.  By looking at the most recent buy or sell signal on each individual point & figure chart, the indicator can help validate when a critical mass of stocks have rotated from a bearish phase to a bullish phase.

At the end of September 2024, the S&P 500 Bullish Percent Index showed a reading just above 80%.  By early December, the indicator was down to around 70%, and at the February 2025 high had reached 55%.  Last week, the S&P 500 Bullish Percent Index was just above 10%.  Indeed, almost all of the S&P 500 members were in confirmed point & figure downtrends.

Breadth Surge Similar to Previous Lows

The Bullish Percent Index for the Nasdaq 100 as well as the S&P 500 both spiked higher by the end of last week following the latest changes to US tariff policy.  As of Monday’s close the Nasdaq 100 Bullish Percent Index had reached 39%, up from 6% a week earlier. 

We can see four other times in the last two years where the Bullish Percent Index has touched the 30% level, and in three of the four times this reversal marked a significant low for the Nasdaq 100.  The most recent observation was last month, which saw a brief upswing before the latest downturn for the major equity averages.

So for both the Nasdaq 100 as well as the S&P 500, a move back above the 30% threshold appears to indicate a decent chance at a tradable move higher.  But will that upswing necessarily lead to sustainable gains?

Long-Term Review Yields Mixed Results

Let’s take a longer look back to the year 2000 and see what has happened following a move below the 30% level for the S&P 500 Bullish Percent Index.  Now we can see that while major lows often coincide with the indicator moving back above 30%, we can also see plenty of times where an initial bounce higher was eventually met with further selling.

Note the extreme low readings in June 2022, August 2015, and January 2009.  Even though there was an initial swing higher in all three cases, the market made a new swing low before achieving an eventual bottom for the bear cycle.

With the Bullish Percent Indexes rotating back to a more neutral reading this week, we are seeing plenty of signs of a tactical rally.  We may even see our Market Trend Model turn bullish on the short-term time frame as early as this Friday.  But with the major averages still making a clear pattern of lower lows and lower highs, we feel further confirmation is necessary before declaring any sort of “all clear” for US stocks.

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

The market has been overvalued for some time but how overvalued is it? Today Carl brings his earnings chart to demonstrate how overvalued the market is right now. We have the final data for Q4 2024.

The market continues to show high volatility but it did calm down somewhat Monday. Carl reviews the market charts you need to see going into this week. He covered not only the market in general, but also covered Bitcoin, Yields, Bonds, Dollar, Gold, Crude Oil and more.

After his market overview, Carl walked us through both the daily and weekly charts of the Magnificent Seven to determine if there is any strength visible. Clue: Not much.

After his review of the Mag 7, Carl discussed Altria (MO) and his strategy to buy high dividend stocks like this one after the market finishes declining from this bear market or beyond. He’s looking for a 50% drawdown eventually.

Erin then took over to talk about sector rotation. Defensive groups are leading as we would expect with Technology trying to stage a comeback. Erin dives into these sectors under the hood to determine participation readings and the ability of them to continue to rally.

Next up Carl brought out his earnings chart to discuss how overvalued the market currently is. He shows his estimates for future movement and discusses where we are right now.

The pair finished the program with a look at viewers’ symbol requests.

00:58 DP Scoreboards

03:33 Market Overview

15:26 Magnificent Seven

20:56 Dividend Discussion

23:34 Sector Rotation

33:29 Earnings Chart

36:41 Questions

40:13 Symbol Requests

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I pay attention to technical support levels as the combination of price support/resistance is always my primary stock market indicator. We’re in a downtrend and, in my opinion, the trading range is very, very clear on the S&P 500 right now:

I think most everyone can agree that much of the selling and fear and panic can be attributed the trade war – at least much of the weakness occurred with startling tariff news. So I figured I’d take a look at Q4 2018, which also experienced a 2-3 month bear market with the S&P 500 just barely reaching the prerequisite 20% drop. Here’s what that looked like:

The chart pattern during Q4 2018 was quite similar. The VIX more than tripled from under 12 to above 36. The VIX also more than tripled in 2025, after starting from a much higher level near 15. In both 2018 and 2025, that initial selling episode saw a drop of roughly 10% before consolidating. Then the next drop was another 10% or so. We don’t know if the selling for 2025 has ended, though, as that’s the wild card.

Here’s what we do know about sentiment. The VIX, with a value in the 50s, is signaling a potential S&P 500 bottom. Historically, surges in the VIX to this level or higher, have coincided either with stock market bottoms or they at least they suggest that any future selling in the S&P 500 is likely to be minor. Here’s a long-term monthly chart of the S&P 500 and the VIX, showing this relationship:

Extreme fear marks bottoms and I believe this is a great visual to support this belief. History tells us that when the VIX tops, we’ve either bottomed or we’re very close to bottoming.

Late last week, we saw both the March Core CPI and March Core PPI come in well below expectations, which was a good result for those hoping for rate cuts to begin again later this year. On Friday, a lot of folks were talking very bearish after the University of Michigan consumer sentiment plummeted to a near 50-year low. The problem with that bearish line of thinking is that sentiment is a contrarian indicator. Bearish readings tend to be quite bullish for stocks, while bullish readings can mark significant tops. Don’t believe me? Check out this chart and then provide me your best bearish argument:

The low readings in the green-shaded areas are actually very bullish. You can’t argue with history and facts. When the general public is feeling despair, it’s the time to buy stocks, not sell. And for those who believe this time is different, let’s check back in one year from now and let’s see where we are.

Note one more thing. The absolute highest consumer sentiment reading was at the beginning of 2000, just before the dot com bubble burst. Everyone felt great back then and the S&P 500 didn’t make a meaningful new all-time high for 13 years. So you tell me, would you rather see sentiment strength or weakness?

I know it sounds awful to hear that consumer sentiment readings are among the lowest in history and it likely makes little sense to many why the stock market would go higher while sentiment is so negative. But you have to remember that the stock market looks 6-9 months ahead. It’s not concerned with the news coming out now. It’s much more concerned about what the market environment will look like later this year.

Here’s my last point for today. We’ve begun to see more bullish rotation among sectors and between growth and value. Let me show you one final chart that highlights the rotation into growth as the S&P 500 continues its descent:

Notice the S&P 500 made its final high in February as money rotated quickly from growth to value in the two months prior. That was Wall Street exiting the riskier areas of the market, when everything still looked fine. It was one of the many reasons why I turned cautious and moved to cash in late January. Now the opposite is occurring. The S&P 500 is downtrending and the news just keeps getting worse. Meanwhile, Wall Street is happily buying all the risky shares you’d like to sell.

Listen, I’ve been wrong before and maybe I’m wrong and the S&P 500 continues to decline throughout 2025. But I trust my review of the market and my signals that have worked so well for me in the past. I’m perfectly fine owning stocks right now.

Tomorrow morning, in our free EB Digest newsletter, I’ll be showing everyone the extreme manipulation that’s been taking place in the stock market the past 4 weeks or so. Market makers are stealing (legally) from all of us. I spotted this manipulation back in June 2022, which helped me to go against the grain and call the market bottom then and I’m seeing it again now. To learn more, be sure to CLICK HERE and sign up for our FREE EB Digest newsletter, if you haven’t already. There’s no credit card required and you may unsubscribe at any time.

Happy trading!

Tom