What to Watch Update for August 18-22, 2025

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Summary of "What to Watch" Video Update
This video, prepared for Monday, August 18, 2025, analyzes market trends for the S&P 500, focusing on whether seasonal weakness will develop in August, a historically negative month in post-election years since 1950. The analysis is divided into three categories: positive, negative, and areas to watch.
Positive Factors:
Market Performance: The S&P 500, NASDAQ, and NASDAQ 100 recently hit all-time highs, with the Dow setting an intraday high. The market reacted positively to the CPI report, though it gave back some gains after a stronger-than-expected PPI report.
Sentiment and Trends: Sentiment is improving, with high beta stocks (e.g., Microsoft, Nvidia) outperforming low beta defensive stocks but possibly stalling. The value-to-tech ratio remains positive, and short- and intermediate-term trends are upward, supported by moving averages and indicators including the Landry Light system and TTM Squeeze.
Market Breadth: Advance-decline lines and oscillators show positive trends, with more new highs than lows across indexes. Stocks are outperforming bonds, suggesting no immediate recession fears.
Sector Strength: Semiconductors, large-cap growth, and discretionary stocks are positive, with recent all-time highs in related ETFs and indexes.
Negative Factors:
Growth vs. Value: The growth-to-value ratio shows weakness, with value slightly outperforming growth intraday, indicating potential market hesitation.
Indicators: The NASDAQ 100 bullish percent index is below 50, signaling negativity. The McClellan Oscillator and indicators (e.g., balance of power, accumulation distribution) showing short-term declines.
Sector Underperformance: The financial sector is still underperforming the S&P 500, with a recent death cross in the ratio. Small and mid-cap growth-to-value ratios are weakening after initial gains post-CPI.
Potential Resistance: The S&P 500 is testing a weekly R1 pivot point (6468) and a long-term trend line, which could act as resistance.
Areas to Watch:
Economic Data: Stronger-than-expected PPI raises inflation concerns, potentially affecting Fed rate cut expectations (25 basis points now more likely than 50). Geopolitical events (e.g., Trump-Putin summit, Middle East tensions) could impact markets.
Employment and Volume: Weekly jobless claims are declining, but continuing claims remain high, indicating prolonged unemployment. Market volume is below average.
Skew Index: High readings suggest a potential big market move, though direction is unclear.
Market Ratios: The S&P is 8.79% above its 200-day moving average, nearing levels that historically preceded pullbacks. The equal-weighted S&P and NASDAQ 100 are lagging their weighted counterparts, showing divergence.
Yields and Bonds: The 10-year yield is below 4.5%, but a rise could pressure stocks. The dollar is in a downtrend, supporting equities. Bond yield curves (e.g., 10-year to 3-month) show no strong conviction.
Sectors and Markets: Bellwether industries (e.g., semiconductors, home builders) show mixed signals, with some pulling back. Retail and regional banks are sideways. The U.S. is underperforming European markets, and emerging markets are leveling off.
Conclusion:
The market remains in an uptrend with positive indicators but shows cracks, including potential resistance, weakening small/mid-caps, and negative short-term signals. Possible seasonal weakness while monitoring economic, geopolitical, and technical factors to assess if the S&P 500 will face a pullback.

PDF of Slides:
https://drive.google.com/file/d/1hFEDuKHjVCB67bRdyObKHI6Z2cAIo8-B/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!