Now despite record highs in the S&P 500 and Nasdaq Composite, the broader market failing to make meaningful headway in a month.
The S&P equal weight and the Dow are still turning near highs but have not confirmed the breakout.
Now defensive sectors are quietly making gains, but keep in mind they can often act as a precursor to market corrections.
Market bread has been sliding since mid-July.
Parts of the tech sector are showing cracks with seasonal weakness approaching and cycles flashing similar signs.
So activity is key moving forward.
Well joining me here at the New York Stock Exchange this morning is Mark Newton, managing director and global head of technical strategy for Fundstra Global Advisors.
Mark, great to have you here.
Thank you so much for joining me.
Well, here we are.
We got. figures out this morning.
But when we take a step back and look at what's happening with the major stock averages, what are we actually not seeing in the headline numbers?
Well, I think a lot of people believe the market is at new highs, and that's not incorrect.
But when you look at the broader market, you know, the S&P 500 on an equal weighted basis really has gone nowhere in the last month.
And so you see a lot of these traditional gauges, be it The Dow, the Dow Jones transports, the Russell, which have not really kept up with the move and large cap technology, so that doesn't necessarily have to be bearish per se, but it is important that the markets start to push to new all-time highs sooner than later.
To your point earlier, we have been seeing.
Few certain signs of defensive sectors starting to gain ground, be it consumer staples and utilities and so normally when that happens, it does warn that potentially a period of risk off type trading and consolidation could occur.
I think the one benefit for the bulls is that sentiment still is largely subdued.
I mean we really have not seen sufficient signs of bullishness or speculation even after almost a 32% rally in about 17 to 18 weeks off the April lows.
And so it's extraordinary.
We've seen a lot of CTAs and hedge funds have slowly started.
To try to keep up with the market, but we're still not really all that speculative.
So if anything, to me that means that even if we do get a seasonal pullback, which could happen in the latter part of August and early September, my thinking is it should prove short lived and really not that long lasting.
And you know, my thinking is the market is still right to be bullish between now and year end.
But I think it will be a little choppier over the next month or so.
Yeah, a lot to keep our eyes on as we head into the rest of 2025, but you mentioned the defensive sector, so what's happening when it comes to market breath?
Well, market breadth has waned since really the latter, really the last week of July.
We have seen a technology, you know, pushed to new highs to its credit, Magnificent 7, which represented the majority of earnings growth and also the majority of percentages within the S&P and the Qs have moved higher, but yet.
Uh, the majority of other sectors largely have not kept pace of late and so we see, you know, groups like materials, even some financials, healthcare, energy, which have all been lagging.
So the burden has been on technology to sort of buoy the market, and that has happened and so that is certainly a good sign without technology.
Uh, the market probably would already be in some type of consolidation, so I think it's right to be bullish, but at the same time, if you have a short term time horizon, it makes sense to consider precious metals and treasuries and maybe a couple of defensive sectors.
You know, many people got way too overweight technology and I think a lot of these stocks have just gotten extraordinarily overbought and they've gone to the stratosphere and so that's that's a good sign.
AI has all been very good for the markets and for us, but I think that Um, you know, there might be a pause approaching and that's what I'm writing to my clients.
We're finally seeing a few signs that that could be right around the corner, but I think it'll prove short-lived and fund, I know that you pay attention to technical levels.
So what are some key levels that you're paying attention to right now and why?
Well, the S&P honestly needs to get back to new all-time highs, which would really take a move back above 6450.
I mean, the QQQ, the Nasdaq 100, has done it.
The Dow Jones has not.
You know, honestly, it's a matter of the market not making new monthly lows for those that are concerned about support.
And so depending on when you're looking at futures or cash, we want up trends to remain in shape.
If those start to give way, volume starts to accelerate, breadth starts to Really increase on the downside that would warn of a probably a 5% or maybe greater 5 to 10% during this time of year, which is normal during most August and post-election years regardless of whether the incumbent stays in or in this case was replaced.
I mean, so we are in a negative time but yet sentiment is still a little sketchy and trends remain intact, so it's been very, very difficult to actually fight this market.
Uh, you know, my cycles do turn down in late August into September, so I expect we will get there and probably have a little bit of a pullback and give the bears a gift, but I don't, it shouldn't really be all that satisfying, and I think markets, you know, turn higher.
We're going to get to 666,500 in my view, in the S&P, and we could actually surpass that, which would mean a move up to 7000 into the into Q4.
So I'm optimistic but not without watching, you know, a few of these cautionary technical signals that have.
Here just in recent weeks.
Yeah, and Mark, as we head into the autumn months, we'll be watching what the Federal Reserve does and of course the key economic data, but there's a lot of noise out there.
So when it comes to signal, you mentioned something that was interesting which is sentiment is sketchy.
So when you're talking about sentiment, what are you looking at?
Well, I look at a number of different things.
I look at traditional retail polls, which many people look at like AAII and fear and greed.
I'll look at the slope of the VIX curve.
I'll look at the CBOE put to call index, which I think is very important, particularly on a moving average basis, you know, institutional polls like name are very important, and I personally look at the BFA.
Uh, you know, portfolio manager poll, I think that's really, really important.
So when you see extremes in some of these, and it normally means that it's right to head for the exits, in this case we've barely seen any sort of move off the lows.
Consumer sentiment remains low.
People are still concerned about the end game for Fed rate cuts and how that's going to materialize along with the ongoing negotiation for tariffs.
I mean we know that they keep getting pushed out, pushed out.
And if people like Waller say that it's a one-off, and I don't disagree, but the longer that these get pushed off, the more we could have a slight bump in inflation.
But we all know AI in general is a very deflationary force for the market.
So I'm pretty optimistic over the next year rates have been coming down for a reason on the long end and now we have 4 cuts built into the curve.
The economy generally has been in great shape.
We've seen ever so slight.
M and things like ISM and the PCE today's CPI was largely, you know, in line, so it appears that you know the inflation data right now is manageable, even though if you see a minor bump in goods.
So the Fed's path should be undeterred.
We should start to cut rates and really as they start to normalize, you know, I think in general that will be good.
We want to be able to give these borrowers a chance to refinance at lower levels on the short end, the 2 years is plummeting today.
So it's a good sign to have rates lower in my view.
Yeah, you're absolutely right when it comes to the tariff goalposts being moved forward.
So hopefully we'll have you back after Labor Day, and as always, thank you so much for your insights, Mark.
Thank you.
