Cancel that bear - Stock Market back (or close to it).

Last week I wrote that some critical levels had been breached, and the stock market was in a short-term bearish trending. Well, this week I may need to cancel that. We had a strong week, and all signs point to a continuation of the bull run. At least for now.

I say at least for now as I do think that we cannot be complacent even in the short-term. The market is in somewhat of a short-term transition where we see some gyrations. Again, this is for the short-term only.

To demonstrate the long-term bull market being intact, here is how the monthly trending heat map looks like for the major markets.

The Dec 2024 stock market price action had brought about a slight negativity in the long-term trending, That has now been erased and we are perfectly bullish.

The weekly trending heat map also looks better than from 2 weeks back.

For my trading activities though, I use the daily trending heat map. That has also improved significantly.

The most direct indicator that the stock markets are reversing from the pullback, and we may have seen the short-term lows is the chart that shows the percentage of underlying stocks that are over the 20-day SMA.

That is a huge upswing taking the levels back close to the levels seen end of Nov 2024. That indicates the broad participation in this reversal from the pullback.

Interestingly, the reversal is driven by non-tech stocks this time. The week’s returns show this phenomenon clearly.

Of course, this is just 1 week, and things can change going forward. It is hard to keep Big Tech is not a leader for too long. So, I am sure this will not remain like this for a long time. But none-the-less, this is good.

Pundits on TV have been talking up the mid-cap sector quite a bit lately. And the results for the year-to-date does show they are putting their money where their mouth is.

So, is midcap going to be the big winner this year? No idea I will review some of the best stocks in the S&P 400 midcap in another note sometime soon though.

Before I move on to the SPX sectors and the Magnificent 7, I want to review the daily charts briefly.

First, the SPY

God to see that price has gone above that short-term bearish trending channel. Note that it has still not made a higher high although I see an equal high being made. I want to see price start making higher high and higher lows to feel convinced that we have seen the near-term lows.

Next, the QQQ

Very similar to the SPY and, like SPY, needs to make the higher high.

Finally, the IWM

Price has made an equal high and I would not yet consider it completely out of the woods. Although it is good to see that (hopefully) that bear flag pattern may not be developing anymore.

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The SPX sectors trending heat map also looks a lot better than a couple of weeks back.

Interesting to see though that XLF, XLI and XLU are trending perfectly bullish whereas XLK, XLC and XLY still have some work to do. Again, in the grand scheme of things, I think this is healthy. The tech sector will not have any trouble coming back.

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The tech sector has been slowed down by AAPL. Here is the proof in the Magnificent 7 trending heat map.

I do not remember when the last time was I saw AAPL perform so much in divergence with the rest of the stock market. And remember that it is still the biggest company.

Here is last week’s performance of the Mag 7 including MAGS which is the ETF for the 7 together.

We can see how bad AAPL has been. And for all the seemingly right moves that Meta boss Mark Zuckerberg is making, it is not reflected in the stock price yet.

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I want to end this note with a quick word on earnings. Bog banks did very well in their earnings releases and conference calls. Next week the tech companies will start with NFLX first out of the gate.

I do think, in general and overall, the earnings trending will rise. I also think that taken together, earnings estimates from companies for 2025 will rise from current levels. I still do not think, wall street is accounting enough for the productivity gains that we will see in 2025 alone due to AI.

Of course, that is my prediction and not to be taken as written in stone. We will know soon whether I am wight and then we can act.

Have a good rest of the long weekend.