The Short-Term S&P 500 Indicator has been flashing caution signals all week. Meanwhile, the Long-Term Indicator, updated only at the weekly close, dropped from +17 to +2. Factoring in an uncertainty margin of ± 3, we may already be in negative territory, technically triggering a multi-week SELL signal.
But there’s more: a textbook weekly bearish impulse has emerged—right after printing a fresh all-time high (ATH). We’ve seen this setup before—most notably prior to the 2020 COVID crash. To invalidate this bearish signal, we’d need a bullish impulse next week and no daily closes below 6245.
We’ve already closed below the critical Daily MA20, and now the market appears magnetized toward a dense cluster of trendline support: Daily MA100, MA200, and Weekly MA50, all converging between 5900 and 6000. This zone could easily become the first destination of a newly forming bearish trend. The Nasdaq (NQ) shows similar deterioration, while the Dow (YM) and Russell 2000 (RTY) have already reached or breached their key supports.
Volatility has spiked—yet the VIX remains below the psychological 20 level, suggesting that short-term recovery rallies are possible. The Daily MA20 may now act as resistance and offer a textbook sell-the-rally setup.
Meanwhile, the MOVE Index (bond market volatility) remains composed. U.S. Treasuries rallied last week, pulling yields lower and rekindling expectations of a Fed rate cut in September, especially after the catastrophic NFP report and downward revisions for May and June. Interestingly, the Utilities sector was already rotating into strength and ended the week as the only sector closing in the green. Consumer Defensive also held up well, and on Friday, Healthcare staged a comeback—despite policy pressure from the White House.
In short: the market is rotating into defensives.
The gold market took the cue and surged, anticipating a rate cut that would reduce opportunity cost relative to cash and bonds. Silver was less dramatic, but is currently trading in a technical buy zone.
Now, let’s talk about the metal that earns its Ph.D. in macro diagnostics: Dr. Copper. It collapsed last week, right after Trump slapped a 50% tariff on copper imports—though input materials like ores, concentrates, cathodes, anodes, and scrap were exempt. Still, the timing suggests something bigger than just tariffs: possibly insider positioning ahead of worsening U.S. macro data. Indeed, Friday’s NFP reinforced recession fears, which had been conveniently ignored since April.
It’s worth remembering: tariffs hit the economy with a lag—usually 2 to 12 months. That’s why Q2 numbers, however strong, are a bit of a red herring.
📊 Earnings Season at a Glance Blended EPS Growth (Actual + Estimated): +10.3% → Third consecutive quarter of double-digit growth
Revenue Growth: +6.0% → Best since Q3 2022
🧾 Beat Rates 82% of S&P 500 companies beat EPS expectations (vs 5-year avg of 78%)
97% of tech companies beat EPS forecasts
79% beat revenue expectations (best since Q2 2021)
EPS beats = +0.9% stock reaction; misses = –5.6% drop
🧱 Sector Standouts Winners:
Info Tech: +21%
Communication Services: +14–17%
Financials: +13%
Loser:
Energy: –20% to –25% EPS contraction
Despite stellar earnings, markets sold into every rally attempt—suggesting the party is over.
🚚 Front-Loading Distortion: Q1 vs Q2 2025 Q1 2025: → Imports surged +41.3% ahead of tariff deadlines → Artificially added +2.25pp to GDP → Net exports dragged GDP into –0.3% contraction
Q2 2025: → Imports fell –30.3%, mechanically lifting GDP to +3.0% → Yet private domestic demand slowed to +1.2% from +1.9%
In other words: headline GDP numbers look good—but don’t get too excited.
💵 Dollar & Crypto The U.S. Dollar Index nearly reversed its downtrend, showing renewed demand for cash, a traditional safe haven. Risk assets—especially growth stocks and crypto—faced headwinds. However, cryptocurrencies, supported by the Bitcoin halving cycle, fared relatively well.
🔮 Outlook → A bearish trend may now be underway and could persist into October, supported by seasonality. → A bearish impulse at ATH is historically a strong sell signal. → Expect countertrend rallies, with the Daily MA20 as likely resistance. → Recession risk is back on the radar.