Best SPX month of gains since May 2023 bodes well for further progress

Short-term trends in US Equities remain bullish, and despite some slowing in the breadth and momentum that has taken place in the last few weeks, uptrends remain intact.  While a rally over February peaks should happen this Summer, it’s hard to make a technical call for an immediate breakout.  Both SPX and QQQ likely will find resistance near February highs that allows for consolidation in late June ahead of a push back to new all-time highs.  Meanwhile, both Treasury yields and the US Dollar are likely to begin trending lower in the weeks to come.  Meanwhile, Safe-Haven trades like Japanese Yen and Gold should be starting to turn back higher, and I expect that Equities can still rally despite this happening into mid-June. I favor Industrials, Financials, Technology and Utilities, while Emerging markets also have appeal given the drop in the US Dollar.  Overall, a push up to between 6000-6150 is likely for SPX, while QQQ should rally to 540 before some minor stalling out.

SPX turned in its best month of gains in May since Spring 2023.  This is encouraging, as Technology managed to outperform all other sectors in May and is steadily making progress in erasing its early-year underperformance.

The positives look to be as follows: Momentum and breadth have improved substantially on an intermediate-term basis, and $SPX and $QQQ show weekly MACD having crossed over to bullish territory on their weekly charts.  Moreover, DeMark exhaustion remains premature even on a weekly basis, requiring at least another two weeks when eyeing $QQQ and $MAGS (Roundhill Magnificent 7 ETF), and likely can help push markets higher into mid-June.  Furthermore, both retail and institutional sentiment has not nearly recovered to the extent that sentiment can be called bullish despite a 20% rally off the lows from early April.  While sentiment has certainly gotten less bearish, most CTA’s and Hedge funds aren’t nearly as bullish as might be expected after such a recent move.

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