June 13, 2025

The major averages were on track for a third consecutive week of gains before Friday's selloff as middle east tensions ratcheted up sending global markets sharply lower. Crude oil prices and gold surged higher to end the week as investors sought out safer assets, but Treasury yield moves were somewhat muted and finished lower on the week. The Energy (XLE) sector jumped +5.62% for the period on higher crude prices, while the other sectors finished mixed. Financial (XLF), Industrial (XLI) and Communication Services (XLC) were the weakest market groups, while Healthcare (XLV) also outperformed. Investors had stepped in and bought the dips earlier in the week as better-than-expected inflation data led to a slide in yields, while perceived progress in US /China trade negotiations also helped to prop up share prices. Market participants stayed on the sidelines ahead of the weekend however, to wait on what retaliatory responses would erupt. With Friday's drop the major averages closed the period with modest losses, but the DJIA lost support at its 200-day moving average (MA). Next week, global markets will focus on middle east tensions while combing over manufacturing data in the US. The NYSE is closed on Thursday for the Juneteenth holiday.

For the period, the DJIA lost 565.08 points (-1.3%) and settled at 42197.797. The S&P 500 gave back 23.39 points (-0.4%) and closed at 5976.97. The NASDAQ dropped 123.12 points (-0.6%) finishing at 19406.83, while the small cap Russell 2000 tumbled 31.74 points (-1.5%) and settled at 2100.51.

Market Outlook: The technical condition of the market remained bullish, but Friday's selloff pulled the technical indicators back to a neutral position as the rally paused just below new highs. MACD, a short-term trend gauge, is flat for the DJIA, S&P 500 and NASDAQ and Momentum as measured by the 14-day RSI is neutral and slowing. Friday's drop pulled the DJIA back into its prior trading range and below its 200-day MA, while the small cap Russell 2000 ran into resistance at its 200-day MA and closed below it. The DJ Transportation Index slipped below its 100-day MA during the week and remains below its 200-day MA. The Philadelphia Semiconductor Index is the only major average that finished higher during the week. The VIX spiked on Friday indicating traders believe stocks are prone to further downside as Mideast tensions flare. In addition, from the intraday low on 4/04/25 to Wednesday's high, the S&P 500 had rallied 25% and was overbought by several measures and likely running on fumes. Some consolidation was needed before the bellwether index could take a stab at new highs and this week's pause, if we don't see an escalation of the Mideast conflict, could be what the market needs before grinding higher. However, investors should wait until some resolution in the Israel/Iran conflict is announced before buying dips over the near-term.

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 positive at +6, down two notches from the previous week. Cycles A, B, C and D are bullish, while Cycle E is bearish. The CTI was reset to a bullish configuration the week ending 4/18/25 and will stay positive through June.

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 +8, unchanged from the previous week. Breadth was positive at the NYSE as the Advance/Decline line gained 45 units while the number of new 52-week highs exceeded the number of new lows on four sessions. Breadth was mixed at the NASDAQ as the A/D line lost 1776 units while the number of new highs out did the new lows on four of the five days. Finally, the percentage of stocks above their 50-day moving average jumped to 80.6% vs. 71.8% the previous week, while those above their 200-day moving average rose to 47.9% vs. 41.6% the prior week. Readings above 70.0% denote an overbought condition, while below 20% is bullish. 

Underlying market breadth has been bullish but took a hit on Friday. The NYSE Advance/Decline line, a leading indicator of market direction, hit several all-time highs during the period which bodes well for equities. Furthermore, new 52-week highs outdid the new lows on both the NYSE and NASDAQ and the number of new lows continues to contract pointing to a broadening of leadership.

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 -1, down a notch from the previous week. 

The rally in stocks has kept Investor Sentiment in the neutral camp and is far from becoming frothy which can forewarn of a market top. The American Association of Individual Investors (AAII) saw an uptick in retail bulls but remains below the historical average of 37.5% for an 18th time over the last 19 weeks. The National Association of Active Investment Managers (NAAIM) Exposure Index was steady at 82.7%. More fireworks over the weekend, however, is likely to weigh on bullish sentiment leading to an increase in bears. 

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bullish as of the week ending 5/02/2025 (DJIA - 41317.43). 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 6/12/25. Strongest: Technology Hardware, Metals & Mining, Construction and Healthcare Products. Weakest: Paper & Forest Products, Conglomerates, Food, Beverage, & Tobacco and REITs. 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 6/12/25 were: Sector-Energy (+7.05%), Sector-Alternative Energy (+4.89%), Commodity-Energy (+4.68%), Specialty Natural Resources (+3.62%) and Specialty Technology (+3.42%). The weakest categories were: Shorts (-3.20%), Commodity-Agriculture (-0.90%) and Specialty Retail (-0.30%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT