March 14, 2025

The major indexes put in their worst week in two years as the Trump administration's burgeoning trade war with several U.S. trading partners took its toll on the market. The S&P 500 got hit hard as it briefly dipped into correction territory before a bounce on Friday pared back some of the losses. The Magnificent 7 stocks led the decline and dragged the NASDAQ further into correction territory while the S&P 500 broke below its 200-day MA for the first time since November 2023. Key inflation gauges including the Consumer Price Index (CPI) and the Producer Price Index (PPI) surprised investors as they came in below estimates, but tough tariff talks overshadowed the soft inflation readings. 

With tariff threats expanding into the Eurozone, the S&P 500 took another leg lower and touched the 61.8% retracement level off the rally from August-February. With the Market Edge - S&P Short Range Oscillator (SRO) flashing an extreme oversold reading (-6.5%) on Thursday night, investors went bargain hunting on Friday and bid up stocks to somewhat lessen the blow of another rough week for the major averages. The only market sectors immune from this week's broad selloff were Utilities (XLU) and Energy (XLE) while the other nine sectors were all down more than -1.2%. For the period, the DJIA dropped 1313.53 points (-3.1%) and settled at 41488.19. The S&P 500 slipped 131.26 points (-2.3%) and closed at 5638.94. The NASDAQ tumbled 442.13 points (-2.4%) finishing at 17754.09, while the small cap Russell 2000 lost 31.38 point (-1.5%) and settled at 2044.10. 

Market Outlook: The technical condition of the market continued to weaken last week as all of the major indexes finished lower. Short-term technical indicators are bearish with MACD, a short-term trend gauge, and Momentum, as measured by the 14-day RSI, in negative ground. The Average Directional Index (ADX) moved into the 30's which confirms that the current downtrend remains strong. In addition, all of the major indexes closed below their 200-day moving averages while negative longer-term breadth continues to be a worry. 

However, the DJIA, S&P 500, NASDAQ and NDX 100 have all retested their 61.8% retracement levels off the rally from August 2024 through February 2025 and bounced higher to end the period. This move could be signaling a key support area moving forward. The new DJIA downside target is around 39000 which is near the August 2024 lows.  

Secondary indexes, which includes the DJ Transportation Index, small cap Russell 2000 and Philadelphia Semiconductor Index, are solidly below their respective 200-day moving average for the third consecutive week and have retested their lows from August 2024. The VIX, (Volatility Index), almost touched the 30 level on several occasions last week before settling back around 21. A chart of these indicators can be found by going to the Market Edge Home page and clicking on Market Recap, which is on the right-hand side of the page just below the Second Opinion Status numbers. 

Cyclical Trend Index (CTI): The underlying premise of the CTI is that the market, as measured by the Dow Jones Industrial Average (DJIA), tends to move in cycles that often resemble sine waves. There are five identifiable cycles, each with different time durations at work in the market at all times.   

Currently, the CTI is negative at -1, unchanged from the previous week. Cycles B and E are bullish, while Cycles A, C and D are bearish. The CTI is projected to remain in a negative configuration through March. 

Momentum Index (MI): The market's momentum is measured by comparing the strength or weakness of several broad market indexes to the DJIA. Readings of -4 and lower are regarded as bearish since it is an indication that a majority of the broader based market indexes are weaker than the DJIA on a percentage basis. Conversely, readings of +4 or higher are regarded as bullish. 

The Momentum Index is Negative at -6, unchanged from the previous week. Breadth was negative at the NYSE as the Advance/Decline line lost 2186 units while the number of new 52-week lows exceeded the number of new highs on three out of five days. Breadth was also negative at the NASDAQ as the A/D line dropped 3181 units while the number of new lows out did the new highs on three out of five days. Finally, the percentage of stocks above their 50-day moving average dropped to 29.0% vs. 33.7% the previous week, while those above their 200-day moving average fell to 24.4% vs. 39.4% the prior week. Readings above 70.0% denote an overbought condition, while below 20% is bullish.  

Sentiment Index (SI): Measuring the market's Bullish or Bearish sentiment is important when attempting to determine the market's future direction. Market Edge tracks thirteen technical indicators listed below that measure excessive bullish or bearish sentiment conditions prevalent in the market. The Sentiment Index is Neutral at +2, up one notch from the previous week. Investor Sentiment continues to show pessimism with the American Association of Individual Investors (AAII) survey showed only 19.1% of retail investors are bullish on the market. This is the first time that bullish sentiment has been below 20% for three straight weeks. The professionals are becoming more bearish with the National Association of Active Investment Managers (NAAIM) Exposure Index this week at 68.8% while the Percentage of Bullish Investment Advisors fell to 27.6%. That is the lowest number since January 2023. 

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bearish as of the week ending 2/28/2025 (DJIA - 43840.91). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below.

Industry Group Rankings: What's Hot (12) What's Not (18). The following are the strongest and weakest Industry Groups for the period ending 3/13/25. Strongest: Metals & Mining, Integrated Oil & Gas, Agricultural, Infrastructure and Insurance. Weakest: Retail, Technology Hardware, Transportation and Consumer Goods. To review all the Industry Group rankings in the Market Edge universe, click on the Industry Group tab. 

ETF Center: The top performing ETF categories for the week ending 3/13/25 were Shorts (+4.4%), Commodity-Precious Metals (+2.73%), Commodity-Agriculture (+1.28) and Commodity-Base Metals (+0.9%). The weakest categories were Specialty Financial (-5.98%), Sector-Consumer Discretionary (-5.93%), Specialty-Retail (-5.35%), Blend-Small Cap (-4.8%) and Sector-Internet (-4.63%).