July 6th evaluation of stock market.
Bulls remain in control, but this week does have the potential for a turnaround.
DOW Friday Closing Price - 44828
SPX Friday Closing Price - 6279
NASDAQ Friday Closing Price - 22869
RUT Friday Closing Price - 2249
All the reports and events that happened this past week were positive to the stock market. Manufacturing production increased slightly, inflation dropped slightly, job creation increased slightly, and earnings continued (on some of the big companies) to show better than expected results. In addition, Trump's "Big Beautiful bill" was passed and signed into law, meaning tax cuts that stimulate the country on a short-term basis were also a positive addition to the other reports. The SPX and the NASDAQ continued to make new all-time highs, and the DOW made a new rally high and closed only 82 points below the all-time weekly closing high, meaning that the bulls are committed to going farther up this week or face the potential negatives of a double top.
Having said that, there was one potential negative that occurred, whereas the dichotomy between the DOW and the NASDAQ reversed direction, with the former gaining 4.4% on the week and the latter only gaining 1.3%. Over the past few years, when the scenario is bullish for the market, the NASDAQ has outperformed the DOW, meaning that the shift may have some meaning, suggesting perhaps that further upside is now limited. This is backed up with the fact that the NASDAQ is at the highest stochastic overbought condition it has been in during the past 5 years (98.6% out of a potential high of 100%).
Chart-wise, the DOW is the index to watch this week, given that the index closed above an indictive weekly close resistance at 44546 (closed at 44828) and as such, the bulls are committed to making a new all-time weekly closing high above 44911 this Friday, and on a "daily closing basis" also committed to breaking the indicative daily close resistance at 44882 and also making a new all-time daily close above 45014. This latter scenario does mean that every day of this week can be indicative. A daily close below 44303 (without breaking those two resistance levels first) would give new ammunition to the bears, which at this time would be indicative, due to the overbought condition and the fact that 95% of the potential positive news is already "in the picture", meaning that now, it is more about momentum continuing than about positive news.
There is one potential negative that could be announced this week, with the fact that on Wednesday July 9th, the 90-day pause period on tariffs (announced by Trump on April 9th) will expire. This means that Trump could announce additional reciprocal tariffs of as much as 70% on Wednesday, which in turn (and if he does announce them) would be a negative to the market.
Either way, the NASDAQ is already 30% above the previous all-time high weekly close and the SPX is 25% above, and that fact alone (added to the overbought condition and the seasonal tendency for July being a seasonal down month) does suggest that some form of a correction is likely to begin soon. In reading the fundamental outlook of economists (most of them), they generally lean to a sideways trend to occur during the next 2-3 months. That is it for the outlook for this week. There are no economic reports scheduled for this week that could generate movement in one direction or the other. This is a DOW week.
Bulls remain in control, but this week does have the potential for a turnaround.
DOW Friday Closing Price - 44828
SPX Friday Closing Price - 6279
NASDAQ Friday Closing Price - 22869
RUT Friday Closing Price - 2249
All the reports and events that happened this past week were positive to the stock market. Manufacturing production increased slightly, inflation dropped slightly, job creation increased slightly, and earnings continued (on some of the big companies) to show better than expected results. In addition, Trump's "Big Beautiful bill" was passed and signed into law, meaning tax cuts that stimulate the country on a short-term basis were also a positive addition to the other reports. The SPX and the NASDAQ continued to make new all-time highs, and the DOW made a new rally high and closed only 82 points below the all-time weekly closing high, meaning that the bulls are committed to going farther up this week or face the potential negatives of a double top.
Having said that, there was one potential negative that occurred, whereas the dichotomy between the DOW and the NASDAQ reversed direction, with the former gaining 4.4% on the week and the latter only gaining 1.3%. Over the past few years, when the scenario is bullish for the market, the NASDAQ has outperformed the DOW, meaning that the shift may have some meaning, suggesting perhaps that further upside is now limited. This is backed up with the fact that the NASDAQ is at the highest stochastic overbought condition it has been in during the past 5 years (98.6% out of a potential high of 100%).
Chart-wise, the DOW is the index to watch this week, given that the index closed above an indictive weekly close resistance at 44546 (closed at 44828) and as such, the bulls are committed to making a new all-time weekly closing high above 44911 this Friday, and on a "daily closing basis" also committed to breaking the indicative daily close resistance at 44882 and also making a new all-time daily close above 45014. This latter scenario does mean that every day of this week can be indicative. A daily close below 44303 (without breaking those two resistance levels first) would give new ammunition to the bears, which at this time would be indicative, due to the overbought condition and the fact that 95% of the potential positive news is already "in the picture", meaning that now, it is more about momentum continuing than about positive news.
There is one potential negative that could be announced this week, with the fact that on Wednesday July 9th, the 90-day pause period on tariffs (announced by Trump on April 9th) will expire. This means that Trump could announce additional reciprocal tariffs of as much as 70% on Wednesday, which in turn (and if he does announce them) would be a negative to the market.
Either way, the NASDAQ is already 30% above the previous all-time high weekly close and the SPX is 25% above, and that fact alone (added to the overbought condition and the seasonal tendency for July being a seasonal down month) does suggest that some form of a correction is likely to begin soon. In reading the fundamental outlook of economists (most of them), they generally lean to a sideways trend to occur during the next 2-3 months. That is it for the outlook for this week. There are no economic reports scheduled for this week that could generate movement in one direction or the other. This is a DOW week.
