InterMarket Analysis Update for Monday July 21, 2025

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Key points:
1. S&P 500 Valuation:
Historically overvalued based on earnings reports, with the Shiller PE ratio at 38.37 (well above the median/mean of 16-17).
Forward earnings projections show the S&P 500 at 22.1, mega-cap stocks at 29.1 (overvalued but driving market performance), mid-caps at 16.1, and small-caps at 15.5 (fairly priced but underperforming).
Equities are at record highs, with PE ratios nearing historical peaks.
2. Growth vs. Value:
Growth stocks are outperforming value stocks, which is positive for the market. Growth is in a solid uptrend, while value is weaker, retracing toward its 50-day moving average.
Ratios and ETFs (from 2005 and 2022 data) confirm growth's dominance over value, with small-cap and mid-cap growth showing some resilience but not fully aligning with broader indices.
3. Inflation and Commodities:
Inflation is ticking up, moving above declining moving averages, raising concerns after a multi-year downtrend.
The CRB Index (commodities) and Baltic Dry Index are in uptrends, signaling rising shipping costs and commodity prices. CPI data was hotter than expected, with inflation expectations rising and not nearing the Fed’s 2% target.
Specific commodities: Aluminum, corn, and wheat are in downtrends (non-inflationary), while fertilizer, lumber, oil, and copper are in uptrends. Copper’s strength is a positive economic signal, with the copper-to-gold ratio rising.
4. Other Markets and Correlations:
Gold is sideways but outperforming oil; silver is slightly outperforming gold. The U.S. dollar is weakening, benefiting stocks (favorable for imports/exports). The euro, yen, and pound are in uptrends against the dollar.
NASDAQ 100 and S&P 100 outperforming the S&P 500, but small caps and equal-weighted S&P underperforming, showing market strength is driven by mega-cap stocks.
5. Sector Analysis (S&P 500’s 11 Sectors):
Strong Sectors: Industrials, technology, and semiconductors are in uptrends, with tech and semis outperforming the S&P 500. Utilities are performing well, potentially as a growth sector due to AI, crypto, and electric vehicles.
Weaker Sectors: Energy is volatile and underperforming; financials are concerning but may improve post-earnings; staples, real estate, and healthcare (defensive sectors) are underperforming, which is market-positive.
Discretionary: Showing improvement with a recent golden cross vs. staples.
6. Bonds and Yields:
Bonds (total bond ETF, high-yield, investment-grade, junk, corporate, world bonds) are in uptrends based on price. Junk bonds outperforming government bonds.
The 10-year yield is in a higher historical range, with recent declines. Long-term bonds and commodities underperforming stocks.
Bond volatility (MOVE index) and stock volatility (VIX) are declining, with a high correlation between the two.
7. Global and Alternative Assets:
Global stocks (ex-U.S.) outperforming U.S. stocks. Emerging markets, high-leverage loans, and Bitcoin are in uptrends. Japan’s Nikkei is still near 1989 levels, with risks if interest rates rise.
Micro-caps showing a recent golden cross, but small and mid-caps lagging. Semiconductors and AI/tech ETFs are setting all-time highs.
8. Long-Term Trends and Correlations:
Monthly charts show the NYSE and S&P 500 at all-time highs, with positive momentum (PPO oscillator). U.S. stocks vs. global stocks show U.S. underperformance but holding above moving averages.
Stocks-to-commodities and stocks-to-bonds ratios favor stocks. The Coppock Curve (long-term momentum) is declining but not critical yet.
9. Positive and Negative Lists:
Positives: Growth, value, copper, euro, pound, yen, CRB index, gold, silver, mega-caps, tech, semiconductors, staples, bonds, Dow (recent golden cross), micro-caps, NASDAQ, NYSE, broad market measures (Wilshire 5000, total U.S. stock ETF), high-leverage loans, emerging markets, and Bitcoin are in uptrends.
Negatives: Dollar, Dow Jones Composite, mid-caps, and small-caps are lagging, though the Dow Jones Composite is improving.
Conclusion: The market is driven by mega-cap growth stocks, with technology and semiconductors leading. Inflation is a concern, with rising commodity prices and expectations. Defensive sectors underperforming, which is bullish for equities. Bonds and global markets showing strength, but small/mid-caps and the dollar remain weak.

PDF of Slides:
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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!