Will the Bonds Make or Break the Stock Market’s 2025?

Summary: The overall sentiment is cautiously bullish, supported by strong technical trends and leadership from growth and global equities, but tempered by short-term market weakness, neutralizing risk indicators, and pockets of defensive outperformance like Gold.

Risk On

• Markets were off 2-3.5% on the week, though the S&P 500 and Nasdaq held their 200-Day Moving Averages and the overall positive trend from the lows remains intact. A break below their 200-Day Moving Average would add more concern to this market. The S&P 500 and Nasdaq are also still in bull phases on the weekly charts. (+)
• The color charts (moving average of the number of stocks above key moving averages) still shows bullish readings across all time frames, though the 20-day period is at extreme levels. (+)
• Growth continues to outperform value even in the sell-off this week. (+)
• Foreign equities are outperforming the U.S. on both short and longer-term readings and both emerging and developing are in bull phases. (+)
• DBA is still in a bull phase and Dr. Copper had a major breakout. (+)
• Bitcoin put in a new all-time high before coming off a bit on Friday. (+)
• Markets are still in the middle of a strong seasonal period, though recent market performance is already above usual for the month. (+)

Neutral

• Volume patterns softened a little to more of a neutral reading. (+)
• The new high new low ratio came off its most bullish levels and is giving some caution signals. (=)
• Risk gauge pulled back to a neutral reading. (=)
• The percentage of stocks above their key moving averages pulled back hard on the week from extreme overbought levels. (=)
• Five of the six members of the Modern Family are under their 200-Day Moving Average with the exception of semiconductors. (=)
• The Moody’s downgrade primarily impacted the long-end of the yield curve. A treasury auction didn’t go well this week. Overall, rates appear to be stablilzing at these levels. (=)

Risk Off

• Nearly all the sectors were negative on the week, with consumer staples and Gold Miners outperforming. (-)
• The McClellan Oscillator fell back to negative with market internals weakening in the short term. (-)
• The cash VIX reclaimed its 200-Day Moving Average and bounced off of support back into elevated levels. (-)
• With Friday’s close, Gold is back to leading the market in short and longer-term timeframes. (-)