S&P 500 Surges: Overbought but Resilient. Market Update for Monday May 19, 2025

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Market Outlook

The S&P 500 and broader markets are showing a positive long-term shift, holding above support and climbing. Short-term overbought conditions raise pullback risks, but strength is persisting.

Positives

Sentiment: Improved to 71, nearing exuberance at 75.

Growth vs. Value: Growth stocks leading in the short-term, with large-cap above MAs.

Sectors: Discretionary outperforming staples in the short-term; tech, biotech, and hotels are gaining positive momentum.

High Beta/Momentum: Apple, Google, Nvidia leading with positive divergences.

VIX: Below 20, tied to stronger returns, though RSI suggests a bounce (pullback for the SPX).

Breadth: Advance-decline lines hit all-time highs, stocks above MAs rising.

Trends: Short/intermediate-term ADX, MACD, RSI positive; smart money indicators bullish.

Negatives

Consumer Sentiment: Low despite stock gains.

Special K Oscillator: Below red line, improving but cautious.

Zahorchak Method: Dropped to 4, signaling weaker long-term momentum.

Home Construction/Semiconductors: Improving but lagging.

Key Monitors

Jobless Claims: Upward trend could signal recession concerns.

10-Year Yield: Above 4.5% pressures stocks.

Yield Curves/TIPS: Watch for recession/inflation signals.

Gold-to-SPY, Oil, Dollar: Gold declining, oil low, dollar rebounding.

German DAX: US-to-DAX ratio fluctuating as US Stocks are improving.

Concerns

Overbought indicators (RSI, TTM squeeze), low volume on options expiration, declining Bullish Percent Index, and negative divergences (McClellan Oscillator) suggest caution.

Conclusion

Markets are in a strong uptrend with broad improvements, but overbought conditions and some negative divergences warrant vigilance. Monitor jobless claims, yields, and global dynamics for pullback risks vs. continued gains.

PDF of Charts and Slides used in today's video: https://drive.google.com/file/d/1akQT8DA8cm6chUsuJH1kMlRDJ7h8Q0cz/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!