What to Watch Update for Monday July 28, 2025

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The "What to Watch" video update, prepared for Monday, July 28, 2025, analyzes current market trends using various technical indicators and charts, categorizing them into positive, negative, and areas to monitor. Here's a summary:
Positive Indicators:
S&P 500 Performance: The S&P 500 set a new all-time high, with an uptrend confirmed by breaking above resistance levels and maintaining above key moving averages (20, 50, 200-period). The week showed a constructive pattern with a low on Tuesday, followed by gains, particularly on Wednesday and Friday, closing at an all-time high.
Sentiment and Volatility: The Fear and Greed Index is at a high level (around 75), indicating exuberance but not yet signaling a reversal. The VIX is below 20 and declining, suggesting lower volatility and greater market stability.
Growth vs. Value: The S&P growth-to-value ratio is positive, with growth outperforming value, though the red line (value) crossing above the blue line (growth) intraday raises some caution. Mid-cap and small-cap growth-to-value ratios are also positive, with mid-caps nearing a golden cross (50-period MA crossing above 200-period MA).
Market Breadth: The S&P advance-decline line (price and volume) is at all-time highs, and the advance-decline oscillator is above zero, indicating broad market strength. The cumulative advance-decline line and volume for the S&P also hit new highs.
Sector and Broad Market Trends: Financials, tech, and broad market indices (Wilshire 5000, Total US Stock ETF) are setting all-time highs. Stock-to-bond ratios (e.g., S&P 1500 to treasuries) are at all-time highs, suggesting a market expectation of a soft economic landing (no recession). Discretionary-to-staples and tech-to-staples ratios are trending positively, indicating risk-on sentiment.
Technical Indicators: Bollinger Bands %B shows the S&P closing above the upper band, a rare and extreme positive signal. RSI (short and intermediate-term) is high but not rolling over. The McClellan Oscillator (S&P) is above zero, and the weekly Special K chart remains positive. Most moving average studies (20, 50, 100, 200-period) are trending upward.
Negative Indicators:
Smart Money Indicators: Smart Money Indicator #2 (Chaikin Money Flow) and #3 (Chaiken Oscillator) are declining, showing negative divergences despite the S&P’s new highs. The Coppock Curve (momentum oscillator) is clearly negative, and the weekly Mass Index triggered a reversal signal, suggesting a potential downward move.
Daily Special K Chart: Remains below the red line, indicating a lack of confirmation of the weekly uptrend on a daily basis. The Zahorchak Method is on a long-term sell signal.
NYSE McClellan Oscillator: Below zero, suggesting broader market weakness compared to the S&P. The semi-to-tech ratio is declining, raising concerns given the all-time highs in major indices.
Volume and Divergences: Friday’s all-time high was on lower volume, a negative divergence. The 10-day average of highs and lows for the S&P is not above the green line, and stocks above their 20-period MA are making lower highs, indicating potential weakening momentum.
Areas to Monitor:
Sentiment Extremes: The high Fear and Greed Index could act as a contrarian indicator since it is extreme. The S&P’s distance from the 200-day MA (nearing 10%) and the 150-period MA suggests an overextended market.
Sector Performance: Semiconductors and momentum stocks are underperforming, with no new all-time highs despite positive news. Financials are underperforming the S&P, and regional banks are breaking to the downside on a relative basis. Retail and home builders are range-bound or pulling back.
Economic Indicators: Weekly jobless claims are falling, but continuing claims are flat at a high level, indicating prolonged unemployment for some. The 10-year yield is approaching 4.5%, and the 10-3- month yield curve is barely positive, warranting attention for inflation or recession signals.
Market Ratios: The NASDAQ 100 is underperforming the NASDAQ, and the U.S. vs. international stocks ratio shows only a modest improvement. Emerging markets vs. developed markets have pulled back recently.
Seasonality: August and September historically show weaker performance, adding caution to the current exuberance.
Conclusion: The market remains broadly positive, with the S&P 500 and other indices setting all-time highs and technical indicators supporting an uptrend. However, negative divergences in smart money indicators, momentum oscillators, and certain sector underperformances (e.g., semiconductors, financials) suggest potential exhaustion. Monitor key levels (e.g., pivot points, yield curve, sentiment extremes) and economic data such as the upcoming employment report, as August and September could bring volatility.

PDF of Slides:
https://drive.google.com/file/d/1YgL9jf-mD_Tz9z6HSQLMZZUya9WIuoZl/view?usp=sharing

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!