July 11, 2025

The S&P 500 and NASDAQ managed to post new record highs this week in choppy trading as investors tried to shake off trade and tariff headlines, but the major averages ended the period modestly lower. The major averages were mixed early in the period ahead of Trumps Wednesday deadline for trade agreements but were able to regroup and rally after an extension for deals was announced. Gains in big cap tech shares led the charge with Nvidia (NVDA) jumping +1.8% to become the first company with a $4 trillion market cap and Microsoft (MSFT) hitting an all-time high crossing $500 a share on an upgrade from Oppenheimer on its AI prospects. Also giving equities a boost on Wednesday was a dip in yields after solid T-Bill auctions and softer comments on inflation out of the June FOMC Meeting minutes. The major averages looked back on track to extend their weekly win streaks but new tariffs on Canada and other trade partners rattled markets on Friday and sent equities lower. While the Energy (XLE), Utilities (XLU) and Industrial (XLI) sectors were able to nudge higher, the pullback left most of the different market groups red with Financial (XLF), Communication Services (XLC) and Consumer Staples (XLP) all down more than -1%. Yields were little changed but ticked higher on Friday with the rate on the 10-year Treasury ending at 4.42% and the two-year T-Bill landing at 3.90%. Crude oil prices were higher despite OPEC+ increasing production and a dip on Thursday from over supply concerns on rising geopolitical risks in the Mideast and closed at $68.60 a barrel. A threatened 50% tariff on imported copper sent the metal to a record high midweek and the S&P Metals and Mining ETF (XME) surged more than +5% on the week. Bitcoin also punched a new record high closing the week at $117,970. Second quarter earnings season kicked off on a high note as Delta Airlines (DAL) soared +11.99% and Levi Strauss & Co. (LEVI) +11.25% after beating estimates and raising guidance. The DJ Transportation Index was one of the best performers during the period, up +1.0%, hitting its highest mark since February. Friday's selloff left the major averages lower for the period as investors look ahead to Q2 earnings picking up next week with the Money Center Banks reporting late. Next week, the Federal Reserve will get another inflation check ahead of the July FOMC Meeting in the CPI and PPI but after solid job numbers, market participants expect the pause in rate cuts to continue until at least September. Look for added volatility as Q2 earnings roll out next week and investors navigate the uncertainty of the chaos on tariffs out of the White House.

For the period, the DJIA dropped 457.02 points (-1.0%) and settled at 44731.51. The S&P 500 lost 19.60 points (-0.3%) and closed at 6259.75. The NASDAQ eased 15.57 points (-0.1%) finishing at 20585.53, while the small cap Russell 2000 slipped 14.21 points (-0.6%) and settled at 2234.83.

Market Outlook: The technical condition of the market remains positive but the rally off the April lows is showing signs of exhaustion despite new highs by the S&P 500 and NASDAQ this week. The technical indicators deteriorated with MACD, a short-term trend gauge, positive but the MACD Histogram slipping back to neutral and was close to crossing into bearish territory as the week ended. Momentum, as measured by the 14-day RSI, is also positive but upside momentum is slowing. The major averages were in a very overbought condition by several measures this week and in need of some consolidation over the near-term. The Market Edge/S&P Short Range Oscillator (SRO) hit +8% this week which has historically led to profit taking by institutional investors and was the most overbought the market has been since early May but closed the period at +4.99%. However, markets can stay overbought for extended periods of time, and we could see more upside over the near-term. Another red flag is that there are signs of negative divergence appearing in the weekly charts which need to be considered. As the major averages are posting new highs, the 14-week RSI has failed to confirm the move higher and that is often a precursor to a topping pattern in the market. This indicator has repeatedly made lower highs as the different indexes nudge higher in July and is considered a bearish condition. Finally, the Cyclical Trend Index (CTI) slipped into a negative configuration this week which also warrants a more cautious approach to the market. While negative divergence is not an immediate signal to sell stocks, the overbought condition of the stock market coupled with these additional bearish signs is a reason for market participants to take a more cautious approach and change the current market posture to Neutral. With that said, it's still very likely we could see the DJIA try to punch a new high before the current rally runs out of gas as, unless there's another tariff shock, it could take a little longer for upside momentum to turn.

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, down two notches from the previous week. Cycles A, C and D are bullish, while Cycles B and E are bearish. The CTI is projected to remain in a negative setting into August.

Momentum Index (MI): The markets 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 positive at +4, down four notches from the previous week. Breadth was mixed at the NYSE as the Advance/Decline line lost 381 units while the number of new 52-week highs exceeded the number of new lows on each session. Breadth was also mixed at the NASDAQ as the A/D line dropped 966 units while the number of new highs out did the new lows on all five days. Finally, the percentage of stocks above their 50-day moving average eased to 79.1% vs. 79.8% the previous week, while those above their 200-day moving average rose to 60.6% vs. 57.7% the prior week. Readings above 70.0% denote an overbought condition, while below 20% is bullish. 

Underlying market breadth was mixed this week. While new 52-week highs outdid the new lows for a ninth consecutive week, the number of daily new highs contracted into double-digits on the NYSE showing declining leadership. The NYSE Advance/Decline line, which is a leading indicator of market direction, finished the week lower after hitting a new high on Thursday but wasn't hinting that a steeper selloff at this time is in the cards. The NYSE A/D line will usually turn lower a few weeks ahead of a significant market decline and while lower, isn't yet considered a sign of additional negative divergence. 

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 Negative at -3, unchanged from the previous week. 

Investor Sentiment surveys were mixed this week as the noise around tariffs keeps investors guessing over trade policy. Retail bulls were above their historical average for a second straight week but took a step back as reported by the American Association of Individual Investors (AAII).  

The National Association of Active Investment Managers (NAAIM) Exposure Index, while almost fully invested, also saw a decrease in the bulls slipping to 86.3% from 99.3% the prior week. The Percentage of Bullish Investment Advisors, however, saw a small tick higher to 53.8%, but the number is considered a neutral position.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Neutral as of the week ending 7/11/2025 (DJIA - 44371.51). 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 (19) - What's Not (11): The following are the strongest and weakest Industry Groups for the period ending 7/10/25. Strongest: Technology Hardware, Industrial Goods, Automotive and Construction. Weakest: Paper & Forest Products, Conglomerates, Infrastructure, and Insurance. 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 7/10/25 were: Sector-Alternative Energy (+4.23%), Specialty Health (+1.84%), Sector-Energy (+1.77%), Blend-Small Cap (+1.77%) and Sector-Industrial (+1.70%). The weakest categories were: Shorts (-1.01%), Sector-Consumer Staples (-0.89%), Bond-Government Long Term (-0.57%), Commodity-Precious Metals (-0.52%) and Commodity-Base Metals (-0.51%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT