Over the previous three months, the market has largely trended sideways, and volatility has elevated considerably over the previous six weeks. Current occasions, akin to final week’s DeepSeek-driven selloff and at the moment’s sharp morning decline following new tariffs introduced by President Trump, have added to market turbulence and financial uncertainty. Nonetheless, regardless of these short-term disruptions, the broader technical image stays largely bullish.
Beneath the floor, key indicators proceed to help a constructive outlook. Every pullback has resolved larger, sustaining the general uptrend over the previous two years. Threat-on sectors are main, risk-off sectors are lagging, and high-yield credit score markets stay sturdy—all of which verify a risk-taking atmosphere that helps the continued market rally.
This month’s publication will spotlight 5 key charts that present proof of the market’s power. We are going to look at the and , each of which stay in well-defined uptrends. We’ll additionally have a look at high-yield credit score markets, which proceed to advance—an indication that buyers stay assured in financial stability. Lastly, we’ll analyze sector relative power, exhibiting how risk-on sectors are outperforming whereas defensive sectors are underperforming, confirming the broader bullish thesis.
Let’s begin with the S&P 500.
Chart #1: S&P 500 – Nonetheless Bullish
The S&P 500 stays in an uptrend, reinforcing the bullish market construction that has been in place for over a yr. The higher panel of the chart exhibits the index continues to commerce above its 50-day, 100-day, and 200-day transferring averages, all of that are trending larger. It is a key technical signal of power, as a market in a sustained uptrend usually holds above these ranges.
Momentum additionally helps the bullish outlook. The decrease panel of the chart shows the MACD indicator, which is trending larger, confirming optimistic momentum.
In final month’s publication, I famous that the index was sitting on a key help degree—earlier resistance that had been damaged and retested. A robust transfer beneath that degree would have signaled potential weak spot and a potential pattern shift. Nonetheless, the market held agency, and as an alternative of breaking decrease, it superior strongly. The index is now testing resistance on the highs set in early December 2024.
The pattern of upper highs and better lows stays intact. With momentum pointing upward and worth construction confirming power, a breakout above this resistance degree would additional reinforce the bullish case. If our bullish thesis is right, we must always see the index push by this resistance within the close to time period.
Chart #2: Nasdaq 100 – Holding Help and Nonetheless Bullish
The Nasdaq 100 index, just like the S&P 500, has managed to carry the help degree we highlighted in final month’s publication. Regardless of a pointy drop final Monday triggered by information surrounding DeepSeek, which induced a selloff in AI shares, the broader pattern stays intact. The index remains to be above that important help degree, and it continues to pattern larger, sitting above its 50, 100, and 200-day transferring averages, all of that are trending upwards.
Within the decrease panel, the MACD momentum indicator is pointing upwards, indicating that the momentum stays to the upside. Whereas the latest pullback has induced some short-term volatility, the general construction of the index continues to replicate a bullish pattern. The important thing help degree has held agency, and the index remains to be positioned to maneuver larger, suggesting that the pullback could merely be a brief setback inside the bigger bullish pattern.
In abstract, regardless of the short-term volatility, the Nasdaq 100 stays in an uptrend, and we preserve a optimistic outlook on the index because it holds above help and continues to pattern larger with favorable momentum.
Chart #3: Excessive Yield Bonds (HYG) – Confirming a Bullish Market Thesis
The chart of Excessive Yield Bonds () continues to display power, reinforcing our bullish market outlook. Within the prime panel, you’ll be able to see that HYG has lately superior above its December excessive, hitting a brand new 52-week excessive. This marks a major milestone within the ongoing structural uptrend of the asset class. Moreover, HYG stays nicely above its 50, 100, and 200-day transferring averages, that are all trending larger, confirming the power of the bullish pattern.
Within the decrease panel, the MACD momentum indicator is pointing larger, additional suggesting that the momentum in high-yield bonds stays to the upside. The continued power in high-yield bonds is especially notable as a result of if buyers had been involved about financial weak spot, a recession, or elevated default danger, high-yield bonds would usually underperform. As an alternative, their continued advance alerts confidence available in the market and helps our total optimistic outlook.
In brief, the efficiency of high-yield bonds continues to verify our bullish market thesis. Their power aligns with the broader risk-on sentiment and means that the market is more likely to stay in an uptrend.
Chart #4: Threat-On Sectors Relative Energy – Bullish Indicators of Market Sentiment
On this chart, we look at the relative power of key risk-on sectors in comparison with the S&P 500, with information going again three years. The highest panel shows the S&P 500 index, whereas the decrease panel focuses on sectors which can be usually thought-about risk-on: Expertise, Discretionary, Communication, Financials, and Industrials.
In the course of the market correction in 2022, we noticed these risk-on sectors underperform the S&P 500, which is typical during times of market weak spot and bearish sentiment. Nonetheless, as we’ve seen over the previous yr, these sectors have been exhibiting power, reflecting a extra optimistic market sentiment.
has been trending sideways, indicating stability within the sector, although with out important outperformance.
has been advancing, suggesting elevated client spending and optimism about financial development.
has been outperforming since early 2023, exhibiting sturdy momentum on this sector.
have been outperforming since July 2024, signaling investor confidence within the monetary sector.
, which had been trending decrease since January 2024, have turned upward this yr, exhibiting a restoration and renewed power.
On the entire, the power in these risk-on sectors is a optimistic indicator for the market. Their outperformance alerts confidence within the financial outlook and means that buyers are keen to tackle extra danger, which is per a bullish market atmosphere.
Chart #5: Threat-Off Sectors Relative Energy – Confirming the Bullish Market Sentiment
On this chart, we look at the relative power of the normal risk-off sectors – , , , and – in comparison with the S&P 500. The highest panel exhibits the S&P 500 index, and within the decrease panel, we see the relative power of every of those sectors over an extended time interval.
Traditionally, risk-off sectors are inclined to carry out higher throughout occasions of market uncertainty, as buyers search security in defensive belongings. As proven within the chart, these sectors have been in long-term downtrends for over two years, indicating relative weak spot in comparison with the S&P 500. It is a optimistic signal for the broader market, because it displays investor choice for risk-on sectors, that are extra delicate to financial development and market optimism.
It’s additionally vital to notice how these sectors displayed relative power through the 2022 market correction. At the moment, the market was in a bearish part, and buyers flocked to defensive sectors like Staples, Utilities, REITs, and Healthcare. Nonetheless, the present downtrends in these sectors are a stark distinction to the earlier correction, supporting our thesis that market sentiment is presently extra bullish.
The continued relative weak spot in these risk-off sectors additional confirms that buyers are extra centered on risk-on belongings, contributing to the general bullish market sentiment.
Present Account Replace
In each our Conservative and Aggressive fashions, our present fairness allocation is roughly 65% of a totally invested place. The remaining portion of the portfolio is allotted to non-interest rate-sensitive bonds, which supply a level of stability within the occasion of market fluctuations.
Because the market continues to display power, I plan to incrementally enhance our fairness publicity to align with the prevailing bullish circumstances. Nonetheless, ought to the market break down and reverse course, I’ll scale back fairness publicity to mitigate danger and defend in opposition to potential market weak spot.
