Near-term US Equity trends remain bullish, and Monday’s sharp reaction to the announced interim deal has ^SPX and most risk assets pushing higher as WTI Crude, Treasury yields, and the US Dollar all break down in unison. That cross-asset unwind removes a meaningful overhang, and with breadth and momentum slowly improving, sentiment broadly pessimistic, and Central banks likely on hold given the deal, the path of least resistance stays higher into the summer. The timing of the announcement was well planned to avoid further near-term technical deterioration, and while most will reasonably stay skeptical until the terms around nuclear weapons, troops, and sanctions are hammered out over the next couple of months, the market is a forward-looking mechanism and has taken the lead in pricing the positive. The one near-term caveat is this week’s FOMC under incoming Chair Warsh, which could bring some temporary resistance and minor backing-and-filling that fills Monday’s opening gap before the next push higher. It’s right to lean bullish here and use any such weakness as an opportunity to add exposure.
^SPX pushes back up toward the prior highs on the deal, with FOMC the only near-term hurdle
^SPX rallied +1.65% Monday to close near 7,554.28, gapping up on the interim-deal announcement and clearing near-term resistance at 7,517 with price now back above both the downtrend from early June and within striking distance of all-time highs. The next overhead test lies into the prior highs near 7,600–7,620, and I would not be surprised to see some temporary resistance arise into this week’s FOMC under incoming Chair Warsh, with minor backing-and-filling that fills Monday’s opening gap before the next push higher. However, the developments of the last few days have been broadly positive and should serve to postpone any larger setback until late summer.
Support on any weakness this week could be contained near 7,430 and would take a daily close back beneath 7,396 to reopen any near-term concern.
S&P 500 Index (^SPX, daily) – Gap higher on the interim deal grows closer to all-time highs, which already were achieved by Equal-weighted ^SPX and DJIA
Semiconductors snap back sharply on the deal, recovering the early-June pullback
iShares Semiconductor (SOXX) surged roughly +4.22% Monday to trade near 621.43, pushing back to new all-time high territory and recovering the entire early-June pullback in short order. This is a miraculously short period of weakness that occurred, lasting a mere five trading days before snapping back quickly to new highs today.
I had expressed concern about how extended “Semis” had gotten, and I still feel that this sector is quite overbought, with monthly RSI levels in the high 80s above levels where prices peaked in late 2021 ahead of the bear market.
However, it’s going to be right to let price dictate the momentum and not be quick to fade this move until price starts to turn lower. Given this deal having just been announced, I am skeptical that June lows are undercut right away.
Thus, overbought conditions could certainly grow a whole lot more overbought.
The key for trend followers will be when price turns down to break Ichimoku Conversion and Base line levels on daily charts, which currently lie at 553.72 up to 575.86. A break of this would certainly cause concern, but it seems premature given the push back to new highs.
While near-term backing and filling certainly could happen later this week post-FOMC meeting, my thinking is that 575–576 likely would serve as support on weakness.
Overall, “Semis” reasserting strength is a net positive for the tape even as leadership broadens beneath the surface. Short-term trend followers are right to stick with this move until 553 is broken, while last week’s lows at 521.99 are important on a weekly close.
iShares Semiconductor ETF (SOXX, daily) – Sharp snapback recovers the early-June pullback and has pushed back to new all-time highs
Equal-weight Energy remains the conspicuous laggard, and its consolidation looks set to resolve lower
Equal-weight Energy (RSPG) fell roughly -2.56% Monday to trade near 101.48, underperforming as WTI Crude breaks down on the deal, with price pressing down to the lowest levels in months.
The symmetrical triangle for Invesco’s Equal-weighted Energy ETF was broken in late May, but the subsequent bounce attempts failed before turning down to new monthly lows.
This is a negative for Energy, technically speaking, and opens the door toward the early-year lows near $96 for RSPG. With Crude’s larger breakdown still in force, I am maintaining Energy at Underweight and would use any bounce as an opportunity to reduce rather than add. This remains the one group working directly against the otherwise constructive, broadening tape.
Invesco S&P 500 Equal Weight Energy ETF (RSPG, daily) – Symmetrical triangle pressing lower as Crude breaks down
Equal-weight Industrials break out above multi-month resistance, joining the broadening leadership
Equal-weight Industrials (RSPN) pushed up +1.42% Monday to trade near 62.89, breaking out above the descending trendline that had capped the group since the February highs and clearing the prior consolidation near $62. The cap-weighted XLI broke back out to new all-time highs (not shown).
This is a genuine upside breakout rather than a test, and it adds another sector to the broadening list of Financials, REITs, and Materials, which look like attractive alternatives to Technology over the next couple of months.
An immediate push up to test $64 looks correct, technically speaking, while watching carefully for evidence of more meaningful relative strength vs. the ^SPX (which, as shown two charts lower, has not yet occurred).
Invesco S&P 500 Equal Weight Industrials ETF (RSPN, daily) – Breakout above the multi-month descending trendline
The Industrials relative ratio is bouncing to test two different trendlines, but has not yet shown a relative breakout to the Equal-weighted ^SPX
On a relative basis, the daily ratio of equal-weight Industrials versus equal-weight S&P 500 (RSPN/RSP) still has some “work to do” before joining the bullish absolute breakout being seen in charts of RSPN and XLI for Industrials.
Following a healthy +1.85% gain in Capital Goods on Monday, the Industrials sector has begun to strengthen lately.
However, it’s right to call this trend “neutral” relatively speaking, not bullish or bearish, until more trend confirmation starts. This will be one to watch carefully, as Transportation strength on Airline gains (given a larger WTI Crude oil decline) should help to power the DJ Transportation Average (and by extension, Industrials) higher.
Equal-Weight Industrials vs. Equal-Weight S&P 500 (RSPN/RSP, daily) – Bouncing off the rising trendline from the early-2025 lows
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