S&P 500 Climbs 0.41% Despite Looking Tired and Overbought

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Market Update Summary for Thursday, May 15, 2025, and Outlook for Friday, May 16, 2025
S&P 500 Performance on May 15:
The SPX opened lower below S1 (5874), with negative futures, but saw buying during the day, recovering to close up 0.41% on below-average volume.
Key levels: Broke above 5900 (now potential support), hit resistance at R2 (5925), and closed slightly above R1.
The S&P 500 remains positive in short, intermediate, and long terms relative to 20, 50, and 200-day moving averages, though a long-term downtrend persists.
Weakness observed in mega caps, semiconductors, and growth stocks, which underperformed, signaling potential short-term fatigue.
Economic and Sentiment Factors:
Interest Rates: 10-year yield dropped from 4.53% to 4.46%, supporting stocks as it fell below the 4.5% threshold.
Economic Reports:
PPI: Down 0.5% (expected +0.3%), with prior revisions upward, raising inflation concerns. Core PPI (ex-food/energy) -0.4% (expected +0.3%).
Retail Sales: Up 0.1% (weaker than expected 0.2%), with upward revisions.
Jobless Claims: 229,000 (slightly above expected 226,000), continuing claims at 1.881 million.
Empire State Manufacturing: -9.2 (expected +1); Philadelphia Fed: -4 (better than expected -6).
Industrial Production: Unchanged (expected +0.3%), capacity utilization at 77.7% (below 80% full capacity).
Sentiment: Positive but slightly down (69 from 70). FOMO driving market as investors chase recent gains, though valuations are high (forward P/E above 20).
Geopolitical factors (tariffs, trade wars, President Trump’s Middle East trip) add uncertainty but haven’t disrupted the market’s euphoric mood.
Technical Indicators:
Short-Term: Extreme positive readings (StochRSI, Williams%R, CCI (14)(20), Stochastics, 20-period EMA). Rate of change shows rapid recent moves.
Intermediate-Term: Extreme readings in CMB composite, TTM squeeze, Aroon indicator, and bullish percent indices. S&P bullish percent index dropping below its moving average on an up-day signals potential weakness.
Long-Term: Positive above 200-day moving average but still in a downtrend. Zahorchak indicator shows long-term internal weakness (down to 4 from 8).
Volume: Below average
VIX: Below 20, positive for stocks. Advance/decline line strong, but fewer new highs and leveling 10-day moving average suggest caution.
Sector Performance:
Defensive sectors (utilities, staples, real estate, healthcare) outperformed, while growth areas (discretionary, tech, communication) lagged.
Financials positive, but NASDAQ 100, small caps, and mid-caps face resistance at key levels (e.g., 200-day moving averages).
Outlook for May 16:
Market Bias: Neutral to positive for the S&P 500 and NASDAQ, neutral to negative for the Dow. Options expiration may cause volatility.
Economic Data: Housing starts, building permits, import/export prices, and consumer sentiment reports due, with housing and sentiment as key indicators.
Seasonality: Post-election years typically rally after an early April bottom, supporting potential upside.
Key Levels: Watch pivot points (posted on YouTube community tab), 5900 as support. Growth-to-value and discretionary-to-staples ratios remain in downtrends but above moving averages.
Risks: Overbought conditions, declining growth momentum, and geopolitical uncertainties (trade wars, tariffs) could trigger pullbacks.
Conclusion:
The market remains positive across short, intermediate, and long terms but shows signs of short-term weakness, particularly in growth stocks and key technical indicators. Extreme positive readings suggest caution, while defensive sector strength and lower interest rates provide support. Friday’s options expiration and economic data will be critical, with potential for continued gains tempered by risks of overbought conditions and external uncertainties.

PDF of Charts and Slides used in today's video: https://drive.google.com/file/d/1guRWPDJmWy1211lCYPbIppR2d2lpG-mL/view?usp=sharing

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DISCLAIMER This video is for entertainment purposes only. I am not a financial adviser, and you should do your own research and go through your own thought process before investing in a position. Trading is risky!