Six Straight Weeks of Gains and Fresh Record Highs
The S&P 500 and the Nasdaq recorded their sixth consecutive weekly gains as stronger-than-expected quarterly earnings growth and a ceasefire in Iran that could lead to an end to the war lifted both indexes to fresh record highs.
The Nasdaq finished up 4.5% for the week, the S&P 500 added 2.4%, and the Russell 2000 small-cap index gained 1.7%.
A U.S. large-cap growth index outperformed its value counterpart by a wide margin for the fifth week out of the past six, eroding value’s still-sizable year-to-date performance lead. As of Friday’s close, the growth benchmark was up nearly 20% over the past six weeks versus an 11% rise for value. Since the March 30th low, the Nasdaq 100 has gained an astounding 28%, while the S&P 500 and the Russell 2000 both surged about 21%.
Technology led with a gain of approximately 6.7%, with significant surges in semiconductors, including Micron up 10% and Qualcomm up 9%, driven by AI infrastructure demand. Energy and Utilities underperformed, both down more than 3%.
Oil Remains Volatile
Shifting narratives about the conflict in the Middle East continued to affect volatility in the oil market. U.S. crude briefly climbed to $107 per barrel on Monday before sinking to $89 on Wednesday. By Friday afternoon, oil was trading around $95, down about 5% for the week.
As a result of the dramatic surge in oil prices, the Dow Transportation Index dropped a very sharp 5,300 points in just three weeks. Although caused by external economic pressures, in basic Dow Theory such a severe negative divergence like that should not be ignored.
Warning Signs Beneath the Surface
It is also very interesting, and of concern, that although the indices are at or very near all-time highs, the McClellan Oscillator is only at a neutral reading of -4 and only 57% of stocks are above their 40-day moving averages. In addition, the VIX has slipped into the mid-teens and is now at a three-month low, showing a lack of fear and perhaps apathy. These are more indications of a narrowing market that could be nearing an important top.
However, it is important to mention that these types of divergences historically can last a bit longer before prices are affected, and the markets nearly always go further than you can anticipate. This may require patience until a distinct reversal is more apparent.
Key SPX Technical Levels to Watch
Support near 7,362-70, 7,320, 7,280, and 7,250-55. Resistance near 7,400-02 and 7,435-40.
In any case, as we always do at TheTechTrader.com, we’ll Trade What We See, Not What We Think.
HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com
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