A Volatile Week With Modest Overall Gains

The 0.7% returns that the S&P 500 and Nasdaq each posted for the week did not come easily, as stocks sold off on Wednesday before rebounding on Thursday and Friday. The modest overall results left the indexes below the record levels recorded in the first few days of June.

Semiconductors Pull Back After Historic Run

The semiconductor index, which had nearly doubled since the start of the year, pulled back about 12% before partially recovering later in the week. After this historic rally in technology over the past two months, a wobble in semiconductor stocks disrupted the market’s recent calm, triggering a pullback in some of its biggest winners.

Encouragingly, beneath the surface, improving breadth has been signaling a healthier market backdrop, with early signs of rotation and broader participation. Markets have entered the summer in a more volatile but still supportive phase, marked by shifting leadership, a highly anticipated IPO pipeline, and geopolitics coming back into focus.

Small Caps Hit Record Highs

The Russell 2000 small-cap stock index outpaced its large-cap peers by a wide margin, climbing to a record high and extending small caps’ year-to-date performance leadership. The Russell 2000 finished around 4% higher for the week and is now up nearly 19% year to date.

Oil Swings Wildly on Middle East Developments

Oil prices continued to take cues from developments in the Middle East. U.S. crude jumped more than 3% on Wednesday, only to fall on Friday afternoon to the lowest level since mid-April. Oil climbed above $93 per barrel on Wednesday and was trading around $84 on Friday afternoon, down about 6% for the week.

Key SPX Technical Levels to Watch

Support levels at 7,235-45, 7,200, 7,145, and 7,050. Chart resistance appears near 7,485, 7,540, and the 7,590-7,600 zone.

In any case, as we always do at TheTechTrader.com, we will Trade What We See, Not What We Think.

— HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com

The Nine-Week Win Streak Is Over, Here’s What the Charts Are Saying Now

Last week the S&P 500 reversed course after nine consecutive weeks of gains, as a Friday selloff in many semiconductor-related stocks weighed on the broader market. The index finished the week down about 2.5% overall, while the Nasdaq dropped 4.7%.

Bond Market Selloff Resumes

The recent bond market selloff regained momentum after a nearly two-week pause, as yields of U.S. government bonds rose in the wake of Friday’s better-than-expected jobs report. The steepest rise came at the short end of the yield curve, with the 2-year Treasury’s yield closing at 4.16% on Friday, well above the previous week’s closing yield of 4.00%.

Bond market trading reflected rising expectations for a U.S. interest rate increase by year end. Friday’s trading in rate futures markets implied a roughly 72% probability that the Fed would lift its benchmark rate by anywhere from a quarter-point to three-quarters of a point by December.

Bitcoin Hits Lowest Level Since September 2024

Bitcoin fell for the fourth week in a row as the price of the most widely traded cryptocurrency tumbled to the lowest level since September 2024. As of Friday afternoon, Bitcoin was trading around $60,000, down nearly 18% for the week. The cryptocurrency is well below a recent peak of around $82,000 reached on May 10 and a record high of $126,000 set last October.

Oil Remains Volatile

The latest developments in the Middle East conflict continued to buffet oil prices. U.S. crude traded in a wide range, briefly climbing above $96 per barrel on Wednesday before settling to around $90 on Friday afternoon. For the week, oil was up nearly 4%.

My Technical Read: One Day Does Not Make a New Trend….But Watch Closely

Friday’s sharp declines may have broken the back of the current sharply rising trends in most major indices. However, downside follow-through will be necessary to indicate that a new downtrend may have started, as one day does not a new trend make.

The sharp thrust downward we experienced Friday could be just the tip of the iceberg, but next week’s price action may be critical in assessing the trend going forward. It is likely that extreme volatility may be ahead, and this makes intelligent stop losses imperative. In my weekend webinar I indicated how many stocks are at or even a bit below key support levels. If these levels get taken out we could see even more substantial declines.

The current McClellan Oscillator reading sits at -28, which is nowhere near extremely oversold. We will likely need to see a reading closer to -160 to -180 or deeper, and an intraday TICK index near -1,300 to -1,500, to indicate the kind of extreme oversold levels from which rallies are born.

Key SPX Technical Levels to Watch

Support near 7,330-33, then 7,175 and 7,050. Resistance lies near 7,460-65 and 7,495-7,500.

In any case, as we always do at TheTechTrader.com, we will “Trade What We See, Not What We Think.

— HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com

A Ninth Consecutive Weekly Gain

The U.S. stock market extended its rebound from the first quarter’s negative results as the S&P 500 recorded its ninth consecutive weekly gain. Led by information technology stocks, the Nasdaq finished 2.4% higher for the week and the S&P 500 added 1.4%.

Overall, non-energy minerals, consumer durables, and electronic technology were among the top performers during the week, while energy minerals, industrial services, and utilities lagged.

A Strong Month of May in the Books

May’s U.S. stock market gains were big, though they fell short of the unusually strong results recorded in April. The Nasdaq climbed 8.4% in May and the S&P 500 gained 5.1%. In April, both indexes recorded double-digit gains, rebounding from negative first-quarter results.

Year to date, the Russell 2000 small-cap index leads the way with a gain of 17.6%, the Nasdaq Composite is ahead 16%, and the S&P 500 shows a 10.7% gain.

Oil Falls as Iran Talks Progress

Trader optimism over the latest round of U.S.-Iranian negotiations sent oil prices lower for the second week in a row. U.S. crude was trading around $88 per barrel on Friday afternoon, down nearly 10% for the week and roughly 16% lower for May.

Stock indexes in South Korea and Japan climbed to record highs on Friday. A South Korean benchmark surged nearly 11% for the week amid optimism over AI-related stocks, while a Japanese index rose nearly 2%.

Gold Under Pressure

Gold started the week with a bounce, trading around $4,520 per ounce on Tuesday. However, the bounce would not last. By Wednesday gold had fallen to around $4,420, and on Thursday prices slid further, touching a low near $4,390, their weakest level in nearly two months. The dynamic continues to reflect a market where rising rate expectations from persistent inflation are weighing on the metal even as the fundamental case for owning a safe-haven asset remains strong.

Bitcoin Drifts Lower

Bitcoin spent most of the shortened week drifting lower, unable to sustain the enthusiasm from equities. It slipped below $75,000 on Wednesday on new developments regarding the conflict in Iran, and fell further on Thursday, trading near $73,000 to $74,000 as hot inflation data and renewed Middle East uncertainties hit sentiment. The broader crypto market moved in line, with major altcoins all trading lower on the week. On the week Bitcoin lost 4.6%.

Key SPX Technical Levels to Watch

Support near 7,500, 7,440-500, and 7,330-35. Resistance near 7,600, 7,645, and 7,740-50.

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

A Seventh Consecutive Weekly Gain — But Just Barely

The S&P 500 eked out its seventh weekly gain in a row, but the index’s thin 0.2% rise marked a sharp departure from the big increases seen in the preceding weeks. The Nasdaq recorded a fractional weekly decline after stocks rallied on Thursday only to retreat on Friday.

A large-cap growth index outperformed its value counterpart for the sixth week out of the past seven, marking a shift from value’s run of outperformance earlier this year. At the market capitalization level, small-cap stocks lagged in the latest week, with a small-cap benchmark falling 2.3%.

Within the S&P 500, which closed at a record high on Thursday before pulling back Friday, the energy sector advanced the most, while consumer staples and information technology also posted gains. Consumer discretionary, real estate, and materials led declines.

Despite a near 10% correction in March and ongoing uncertainty around the Iran war and oil prices, stocks are back near all-time highs. The S&P 500 is up 8.22% this year and up a stellar 17% since the March 30th lows, while the Nasdaq Composite is ahead 12.84%.

Investors may be wondering why stock markets have been rising despite higher oil prices, elevated inflation, and geopolitical uncertainty.

The answer lies in the resilience of earnings and the momentum of AI-driven demand. But that resilience may now be getting tested.

Should You “Sell in May and Go Away”?

There is an old adage that says “Sell in May and go away.” While it does not hold every year, there is historical evidence suggesting that the May through September period has lower returns on average than the October through April period. Since 1980, average returns in the May through October period have been about 4.6%, while returns in the November through April timeframe were about 8.4% on average.

This year in particular, we have seen a strong rally since the March lows, and the odds of a pause, a period of sideways movement, or possibly a substantial pullback and retest in stock markets could be rising as we head into the summer months.

My Technical Read: Be Vigilant and Tighten Your Stops

Despite the appearance of supporting fundamentals, the recent divergences seen in the indices and underlying technicals are serving as warnings of potential trouble ahead this summer.

My advice to traders is to be very vigilant in the days ahead, pay close attention to technical support levels, and tighten stops as protection.

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