Overbought Market Fueled by Economic News
S&P 500 Continues Its Ascent - Earnings Season is Here
Economic data released this week has been largely positive. Headline Consumer Price Index (CPI) aligned with expectations, while Core CPI came in slightly softer. A notable concern was the rise in goods inflation, which, without the decline in auto prices, would have shown a significant surge in June. Future inflation data, particularly next month's readings, will be crucial in determining any material impact from tariffs. Producer Price Index (PPI) figures also came in softer than expected, with economists universally missing the mark. While health services inflation remains sticky, a significant decline in airfare within the PPI components contributed to the overall softer report.
The July Philadelphia FED data provided a positive signal, with the Manufacturing Index surging to +15.9 (versus -1.0 estimated and -4.0 prior) and Employment rising to +10.3 (versus -9.8 prior). This suggests robust manufacturing activity, contradicting recessionary fears. Furthermore, jobless claims posted another declining week, retreating to 221,000 after being near 250,000 just weeks ago. The earlier spike in jobless claims has fully retraced, confirming that it was primarily due to seasonal factors rather than a fundamental weakening of the labor market.
The S&P 500 continued its upward trajectory this week, pushing to another new all-time high and entering the $6,299 - $6,326 zone I identified last week as a potential bullish destination.
The price action demonstrated a the bullish character of the stock market nowadays: dips remained shallow and were bought at the precise support areas also forecasted in this publication, my designated support level of $6,210 proved to be a solid floor, as the actual low for the week was $6,201.
Similarly, the resistance zone of $6,299 - $6,326 effectively set resistance, with the high of the week reaching $6,315 before closing at $6,296. This past week serves as another powerful testament to the accuracy of the predictive Support and Resistance levels posted every Friday and included in the charts for the weekend’s publications.
The levels for the coming week, covering the SPX and 43 other securities including indices, mega-caps, crypto, and ETFs, are available: Click here.
This weekend’s edition consistently analyzes the following charts in a comprehensive way including support and resistance levels with price targets:
SPX, VIX, NDX, DJI, IWM, SMH, TLT, GLD, SLV, TLT, BRK.B, PLTR, NFLX, AAPL, GOOG, TSLA, NVDA, META, MSFT, AMZN, and BITCOIN; including breadth indicators.
Analyzing several charts consistently every week has a purpose: Providing you a broad vision of the market, since there are usually opposite moves or the momentum shifts in some stocks, for example: PLTR versus NFLX during the last weeks, META vs AAPL, GDX vs SPX, TLT vs NDX, NVDA vs BRK.B, or others like BITCOIN and TSLA which switch gears rapidly.
For this week there are major setups to watch, like BITCON, TSLA, AAPL, IWM, BRK.B, AMZN; and potentially the GOOG, SPX and NDX. Be informed for the earnings season, the recent decline in NFLX despite its earnings beat was consistent with divergences and reversal signals highlighted in this publication.
Before continuing, the following contents present essential market research and educational content to navigate the potential end of the bullish season:
Market Research:
Technical Analysis:
Unlock all that content with the paid plan, and enhance your decision making mastering technical and fundamental analysis.
Let’s begin
Dow Jones (DJI)
Last week in this section, I outlined a bearish picture for the Dow Jones Industrial Average. The analysis was based on the index showing a decline from the $44,800 resistance area while the Stochastic oscillator was in overbought territory.
To validate this bearish view, $44,445 was the key reference level; staying below it would confirm downside momentum. My first support target was set at $44,086, which held until Tuesday.
On Wednesday, however, the price flushed lower, breaking that initial support and reaching our next target at $43,802. The actual low of the week was $43,758—a minimal percentage difference. Although the price bounced from that low, it failed to reclaim the critical $44,445 level, indicating that momentum has not yet shifted back to the bulls.
As of today, the caution mode continues in the chart, the bearish Stochastic crossover is imminent but on the other hand the price set an indecisive candle that might suggest a bullish continuation considering the lower wick. Factors like the consolidation at the point of control (peak of the volume shelf) and the position above the 5 weekly average suggest a chance for a bounce. The odds for a healthy pullback are higher than a continuation of the rally.
For next week, any potential bullish move will be likely as long as $44,224.3 continues as support level. Staying above this area suggests a bullish push towards $44,689.6. Conversely, if this key level is broken, something that could happen if the Stochastic is signaling correctly and the indecisive candle is not validated, the focus shifts to a bearish target of $43,876.9.
The analysis continues for: SPX, VIX, NDX, IWM, SMH, TLT, GLD, SLV, TLT, BRK.B, PLTR, NFLX, AAPL, GOOG, TSLA, NVDA, META, MSFT, AMZN, and BITCOIN; including breadth indicators.
SPX
Let’s completely assess the direction of the stock market with the SPX and NDX. For the SPX in the chart below, the yellow ovals highlight periods of consolidation in the index, as you can tell the outcomes vary when they are assessed individually, but when they are grouped the directional expectation can be fine-tuned as follows: