Tuesday’s session marks an important technical development with ^SPX and QQQ, along with Memory ETF DRAM breaking back out to new highs, joining the Equal-weighted S&P 500 ETF (RSP) and DJIA’s successful breakout from last Friday. This should defer any imminent selloff, likely leading to strength into mid-June with just minimal pullbacks. The mid-May cycle very well could be inverting, given the recent act of multiple indices starting to push back to new highs, and helps to confirm the broadening leadership thesis I had been waiting on, as well as removing much of the breadth concern I had been cataloging in recent weeks. The 5/15–5/19 cyclical inflection window I had been flagging passed without producing meaningful technical damage, and while minor backing and filling could certainly happen over the next week, today’s push back to highs is arguably a short-term positive and should help prices push even higher this week ahead of any consolidation. Technically speaking, it’s right to lean bullish here and use any further weakness as an opportunity to add exposure ahead of the seasonal summer tailwind that my cycle work points to running into mid-to-late July and potentially mid-August.
RSP breakout to new all-time highs above the February peak confirms the broadening leadership story and removes the breadth concern
Overall, the fact that RSP itself has now pushed to a new all-time high speaks to the average stock finally participating, not just NVDA and the Mag 7 doing the heavy lifting. Invesco S&P 500 Equal Weight ETF (RSP) closed Tuesday at $207.64, up 0.51% on the session, and both RSP and DJIA are now back at all-time highs, along with ^SPX and QQQ.
As I have been cataloging in recent weeks, my biggest concern with the ^SPX/QQQ rally to new highs has been the lack of broad-based participation beneath the surface, with the percentage of stocks above the 20-day moving average dropping to 45% and Russell 3000 stocks within 20% of 12-month lows spiking to nearly 30%. Tuesday’s breakout in RSP to new all-time high territory speaks to the broader market finally starting to catch up, though this process will still likely take time. However, those breadth gauges have both improved markedly in recent weeks and look to be positive in the short run.
I expect that the breakout sets up an initial measured-move target up near $211–$213 in RSP, with any weakness likely providing a dip-buying opportunity for a move up to near $215. Support on a daily close lies near $205.51, the area near the prior resistance from early May. As the saying goes, former resistance should now likely become support on weakness.
Invesco S&P 500 Equal Weight ETF (RSP) – Breakout above the February peak near $205 confirms the broadening leadership story and removes near-term breadth concern
WTI Crude oil wedge breakdown looks imminent beneath $93–$95 trendline support, which should continue to support US Equities
WTI Crude oil futures closed Tuesday at $94.22, down 2.87% on the session, having found near-term support right near the prior lows from early May, near $89. This level from 5/6 looks important, but one that I expect to be violated in the near future if Persian Gulf peace talks show more evidence of a concrete deal being achieved.
As shown below, the multi-month consolidation pattern shows a clearly defined descending top trendline with the last four days of weakness having taken prices down to test early May lows. The price action over the last two weeks of late May has been progressively heavier, with Tuesday’s session producing the largest daily decline since early May.
A daily close beneath $89, in my view, should result in a test and break of April lows, en route to $60.
My expectation is that any Hormuz development in the next few weeks will accelerate this breakdown, given that the geopolitical risk premium would deflate quickly on any concrete deal. Furthermore, Crude declining is generally constructive for risk assets, both directly via the Dollar weakening it tends to coincide with, and indirectly via consumer real-income improvement. I expect Crude weakness to continue to act as a tailwind for US Equities into the summer and reinforce my bullish near-term posture.
WTI Crude Oil (CL_F, daily) — Triangle breakdown beneath $89 from early May should lead to $60 into summer and should be constructive for risk assets
Consumer Discretionary should be on the verge of rebounding in the weeks/months ahead
The following seems encouraging after a difficult period for Consumer Discretionary:
- First, the ratio chart of RCD/RSP on a weekly basis has now pulled back to an area near 2020 lows, which looks meaningful.
- Additionally, weekly DeMark exhaustion on the ratio of RCD to RSP (equal-weighted ETFs of Consumer Discretionary vs. equal-weighted S&P 500) has gotten very close to signaling a “13 Countdown” signal (currently on bar 12 of a possible 13).
- Furthermore, Discretionary showed fairly decent strength in the past week, which helps to make a good case for a technical bottom being formed.
Overall, the combination of the multi-year support test, DeMark exhaustion being near completion, and recent outperformance given a weakening Crude-inspired tailwind likely makes a good case that recent underperformance in Discretionary is overdone.
While this sector certainly does not look very bullish at multi-year lows technically speaking relative to the S&P 500 in equal-weighted terms, one can make the case for stabilization and a bounce on a relative basis. Note: while not shown, the absolute chart of RCD made a bullish engulfing pattern last week and has shown some near-term outperformance as Crude has fallen.
RCD / RSP (Equal-Weight Consumer Discretionary vs. Equal-Weight ^SPX, weekly) – Multi-year support test with DeMark 12 of 13 argues for an exhaustion bounce
Roundhill Memory ETF (DRAM) has pushed to new all-time highs above $57 resistance; trend remains your friend despite overbought conditions
Roundhill Memory ETF (DRAM) closed Tuesday at $60.51, up more than 14%, after pushing intraday to a new all-time high of $61.15 in pre-market trade. The breakout above the prior consolidation high near $57 has been confirmed by a sharp jump in volume, which expanded by the most since the early May high, and the move has been driven by individual Memory names like MU and SNDK continuing to push aggressively higher in recent sessions.
While quite overbought based on RSI, DeMark exhaustion looks premature on weekly charts, which makes a compelling case that this recent strength could continue even higher into mid-June.
As I have written previously regarding Semis broadly, these kinds of stretched conditions warrant a close eye, but they’re also quite difficult to fight while no evidence of trend change has emerged.
My expectation is that DRAM continues to work over the next 2–3 weeks despite the overbought conditions, and any dips back to test the area of Tuesday’s breakout back to the mid-$50s would represent an attractive near-term buying opportunity.
On an intermediate-term basis (meaning in this case, 3–5 months) I don’t find this group attractive on a risk/reward basis. However, until price reverses today’s breakout and undercuts former May peaks — now support in the mid-$50s — minor weakness on the heels of Tuesday’s rally won’t be too problematic.
My expectation is that a further rally into June could carry DRAM up to the high $60s or even low $70s before this peaks out. Thus, while this recent strength is unsustainable in all likelihood into fall 2026, I expect further near-term strength.
Roundhill Memory ETF (DRAM, hourly) – Breakout above $57 resistance to new all-time highs; buy dips with $56–$57 representing support
RGI/RSP weekly continues consolidating below the trendline break — maintain Overweight Industrials intermediate-term, but let the ratio stabilize
The weekly ratio of Invesco S&P 500 Equal-Weight Industrials (RGI) versus Invesco S&P 500 Equal-Weight (RSP) continues to lag and has not rebounded just yet to represent Industrials being a sector to favor for outperformance on a near-term basis, despite markets being at new highs.
As I had written in my 5/13 note, a trendline break of this magnitude is normally not an immediate buy signal, and the action since then has confirmed that patience is the right posture.
Defense stocks have remained under pressure given that markets continue to sniff out a possible end to the war, and Airlines have only recently begun to act a bit better, given Crude oil’s selling pressure intensifying.
Overall, it pays to be patient on Industrials, and this sector likely won’t outperform Technology into mid-June. However, my intermediate-term preference for Industrials within the broader market remains intact given the cyclical setup, and Industrials remains an Overweight technically. Recent strength in both GE and GEV are positives for Industrials, and a further rally in Airlines on a Crude oil support violation should help this sector to start showing better relative strength.
RGI / RSP (Equal-Weight Industrials vs. Equal-Weight ^SPX, weekly) – Still consolidating following the multi-year rising trendline break; patience required, but still Overweight
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