With a pronounced red outside bar, the S&P 500 exhibited strong risk-off flows into the end of July. This move aligns well with seasonal weakness and the current phase identified by our SP500 Indicator, which has now declined to moderately bearish territory (-25 ± 7). At this level, bullish reversals are statistically possible—but not yet probable—meaning further downside remains on the table.
Early August price action is likely to provide directional clues. Caution remains warranted, as evidence suggests the top formation is still unfolding. Topping phases often feature sharp, short-lived rallies that can mislead and extend the current whipsaw environment.
The CBOE 1-Day Volatility Index (VIX1D) continues to signal the potential for sudden, aggressive market swings.
On a longer-term basis, the weekly SP500 Indicator remains intact—the structural bullish trend has not yet been breached. However, today’s close will be critical in confirming or rejecting that outlook.
Defensive rotation was evident yesterday, with Utilities being the only sector to post gains. This typically indicates a shift in investor sentiment toward capital preservation. Notably, since utility dividends often compete with Treasury yields, this move could foreshadow falling rates.
Meanwhile, “Dr. Copper” is flashing warning signs. The steep decline in copper prices suggests growing concerns about economic softness—likely not fully explained by the limited exemptions from the newly implemented 50% tariffs.
Seasonal tendencies point to continued weakness in the coming weeks. Notably, index put options remain attractively priced, offering asymmetric protection should volatility spike.