Weekly Trader's Outlook

If you read last week's blog you might recall that I had a "Slightly Bearish" forecast for this week, citing stretched RSI readings and the potential for some modest consolidation. Markets experienced some consolidation early this week, and although the S&P 500 technically edged out a fresh all-time intraday high yesterday, the index is down 0.20% on the week so the forecast turned out to be accurate. There wasn't a lot of economic data to move markets, but there sure was a lot of trade/tariff headlines. First, the expiration of the 90-day reciprocal tariff deadline (July 9th) was pushed out by the White House to August 1st. When asked, U.S. President Donald Trump said that the August 1st deadline was "firm, but not 100% firm," depending on negotiations. Trump also announced new tariff rates of 25% on Japan and South Korea starting August 1st and sent letters with new tariff rates to 14 other countries, threatening tariff rates as high as 40% for some. It's unclear whether these moves are negotiating tactics, or whether those tariff rates will be final, but it appears likely that markets will have to adjust to higher tariff rates than the current 10%. President Trump also announced a 50% tariff on imported copper and threatened a 50% tariff on Brazil, citing legal action against its former President Jair Bolsonaro and U.S. tech firms. Given the barrage of tariff announcements U.S equities held up relatively well this week in my view. Following the rally in stocks off the April bottom perhaps investors are "once bitten, twice shy" and reluctant to react in the same way. Or perhaps investors are becoming complacent and not respecting the potential impact that tariffs may have on economic growth/inflation.

At the time of this writing (3:05 p.m. ET), all the major indices are trading in the red (DJI – 300, SPX – 21, COMPX – 39) as investors appear to be taking some exposure off the table ahead of the weekend. Perhaps President Trump stating that he will make a "major statement" on Russia on Monday has something to do with the tentative price action. Regardless, technical momentum has exhibited some signs of exhaustion this week, and market seasonality is shifting from bullish to a more bearish stance in the coming weeks (more on this in the "Technical Take" section below). Outside of trade and geopolitics, there will be several potential market moving catalysts next week. First, Q2 earning season will unofficially kick off with the big banks on Tuesday. Next, we're going to get several key economic data points on both inflation (Consumer Price Index/Producer Price Index, CPI/PPI) and the U.S. consumer (Retail Sales). While the economic data has held up relatively well recently, any negative surprises could generate some selling pressure given the impressive rally that stocks have staged off the April lows. And while I don't expect earnings from the financial sector to be bad (the earnings bar has been lowered heading into next week), I think the potential for a "sell on the news" response is elevated given the setup. Therefore, my forecast for next week is "Slightly Bearish." What could challenge next week's outlook? This has been a Teflon market that has been in "melt-up mode" for so long that the bullish momentum could just simply persist next week.

Other Potential Market-Moving Catalysts:

Economic:

• Monday (7/14): no reports
• Tuesday (7/15): Consumer Price Index (CPI), Empire State Manufacturing
• Wednesday (7/16): Producer Price Index (PPI), Capacity Utilization, Industrial Production, EIA Crude Oil Inventories, MBA Mortgage Applications Index
• Thursday (7/17): Retail Sales, Business Inventories, Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Import Prices, Export Prices, NAHB Housing Market Index, Net Long-Term TIC Flows, Philadelphia Fed Index
• Friday (7/18): Building Permits, Housing Starts, University of Michigan Consumer Sentiment

Earnings:

• Monday (7/14): Fastenal Co. (FAST), FB Financial Corp. (FBK), Equity Bancshares Inc. (EQBK), Barnes & Noble Education Inc. (BNED), Simulations Plus Inc. (SLP)
• Tuesday (7/15): JPMorgan Chas & Co. (JPM), Wells Fargo & Co. (WFC), BlackRock Inc. (BLK), Citigroup Inc. (C), Bank of New York Mellon Corp. (BK), State Street Corp. (STT), JB Hunt Transport Services (JBHT), Omnicom Group Inc. (OMC), Pinnacle Financial Partners (PNFP)
• Wednesday (7/16): Johnson & Johnson (JNJ), Bank of America Corp. (BAC), ASML Holdings NV (ASML), Morgan Stanley (MS), Goldman Sachs Group (GS), Progressive Corp. (PGR), Prologis Inc. (PLD), Kinder Morgan Inc. (KMI), United Airlines Holdings Inc. (UAL), Alcoa Corp. (AA)
• Thursday (7/17): Taiwan Semiconductor Manufacturing (TSM), GE Aerospace (GE), Novartis AG (NVS), Abbott Laboratories (ABT), PepsiCo Inc. (PSP), Cintas Corp. (CTAS), Elevance Health Inc. (ELV), US Bancorp (USB), Travelers Companies (TRV), Netflix (NFLX), Interactive Brokers Group Inc. (IBKR), Western Alliance Bancorp (WAL), Bank OZK (OZK)
• Friday (7/18): American Express Co. (AXP), Charles Schwab Corp. (SCHW), 3M Co. (MMM), Truist Financial Corp. (TFC), Schlumberger NV (SLB), Regions Financial Corp. (RF), Ally Financial Corp. (ALLY), Comerica Inc. (CMA)

There wasn't a lot of economic data this week, but we did get the June Federal Open Market Committee (FOMC) minutes and of course weekly jobless claims data. The FOMC minutes didn't contain any surprises, while Initial Claims declined for the fourth consecutive week, which is supportive of a healthy labor market. Here's the breakdown from this week's reports:

• FOMC June 17-18th Meeting Minutes: While most Federal Reserve officials agreed that the current fed funds rate could be lowered, there was a divergence in opinion as to how many cuts and how soon, citing the potential inflationary impact of tariffs.
• Consumer Credit: $5.1B vs. $8.6B est.
• NFIB Small Business Optimism: Edged down 0.2 from the prior month to 98.6.
• Initial Jobless Claims: Dropped 5K week-over-week to 227K and below the 242K expected. Continuing Claims rose 10K from last week at 1.965M.
• The Atlanta Fed's GDPNow "nowcast" for Q2 GDP is unchanged at +2.6% versus last week.

Treasury yields moved slightly higher this week, perhaps related to some of the tariff news. Compared to last Friday, two-year Treasury yields rose ~2 basis points (3.90% vs. 3.88%), 10-year yields also moved up ~2 basis points (4.40% vs. 4.38%), while 30-year yields increased ~7 basis points (4.93% vs. 4.86%).

Expectations around potential rate cuts from the Fed were little changed this week, supported by the tone out of the FOMC Minutes. Per Bloomberg, expectations for a 25-basis-point cut at the July FOMC remain near zero (6% vs. 4% last week), while the total 2025 expected 25-basis-point cuts dropped slightly to 2.01 from 2.05 on a week-over-week basis.

Last week I highlighted the stretched Relative Strength Index (RSI) reading of 75 on the S&P 500 (SPX) and on the first two days of this week the index modestly consolidated lower. The dip buyers subsequently stepped back in, notching a fresh intraday high of 6,290 for the SPX. However, yesterday's new high was met with a correspondingly lower RSI, which would confirm a negative divergence, assuming the index doesn't continue to push higher and pull the RSI above 75 with it. We should have a better picture next week, but the setup on the S&P is looking eerily similar to July of 2024 which was met with a subsequent sell off, and seasonality turns more bearish as we get into the back half of July, so I read the technical tea leaves through cautious eyes.  

Near-term technical translation: slightly bearish

The technical setup on the Nasdaq 100 (NDX) looks akin to the SPX. The NDX hit a fresh all-time intraday high on Wednesday (22,915), but just barely, and the RSI has been notching successively lower levels, which suggests momentum is waning. Therefore, my technical assessment is leaning cautious on the NDX as well, at least for next week.  

Near-term technical translation: intermediate-term bullish, near-term cautious

Bitcoin's rally to fresh all-time highs this week (~$118,900) may be driven in part by anticipation of several crypto-related bills that will be under consideration by Congress next week. In what some Republicans are calling "crypto week," three pieces of legislation will be under discussion: the GENIUS Act, which outlines a regulatory framework for stablecoins, the Anti-CBDC Surveillance State Act, and the Digital Asset Market Clarity (CLARITY) Act. Back in June the Senate passed GENIUS Act and now awaits a full vote from the House of Representatives before making its way to President Trump's desk to be signed into law. The House could have some proposed amendments, but President Trump asked House lawmakers to pass a "clean" bill with "no add-ons."

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, stocks mostly maintained "melt-up mode" this week and market breadth expanded modestly. However, although stocks are hitting all-time highs, market breadth remains well below the highs seen back in 2021. On a week-over-week basis, the SPX (white line) breadth expanded to 64.60% from 62.73%, the CCMP (blue line) moved up to 48.60% from 44.82%, and the RTY (red line) rose to 53.96% versus 51.40%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (62 today): AutoNation Inc. (AN - $2.19 to $212.64), Crane Company (CR - $1.37 to $185.47), Hilton Inc. (HLT - $0.83 to $276.65), Nvidia Corp. (NVDA + $2.40 to $166.50), Royal Caribbean Cruises Ltd. (RCL - $2.61 to $338.75), Sofi Technologies Inc. (SOFI + $0.77 to $21.74)

This Week's Notable 52-week Lows (23 today): Centene Corp. (CNC - $0.66 to $31.86), Chemed Inc. (CHE - $6.00 to $459.68), Conagra Brands. (CAG - $0.55 to $18.94), Elevance Health Inc. (ELV - $5.28 to $340.57), Progress Software Inc. (PRGS - $1.29 to $49.35), Molina Healthcare Inc. (MOH - $6.89 to $221.69)