Sunday Post - Recap & Week Ahead 5/18/2025

• PLEASE SEE INTRO POST AND READ DISCLAIMER & INTELLECTUAL PROPERTY SECTIONS

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US equities surged for the week, with broad-based strength across major indexes and sectors. The S&P 500 advanced +5.3%, the Nasdaq led with a +7.2% gain, the Dow Jones added +3.4%, and the Russell 2000 climbed +4.5%, reflecting a strong risk-on tone in the market. Growth-oriented sectors, particularly technology and consumer discretionary, outperformed significantly, while defensives such as utilities and real estate lagged as investors rotated toward cyclical exposure.

Fund flow data confirmed this renewed risk appetite, with US equity funds seeing net inflows of approximately $12.9 billion—a sharp reversal from prior weeks—while money market funds experienced outflows of over $30 billion, suggesting investors were moving capital out of cash and back into risk assets. Sentiment indicators aligned with this shift: the AAII bullish sentiment reading rose to 36%, the CNN Fear & Greed Index climbed into "Greed" territory near 70, and the VIX dropped into the high teens, indicating reduced market anxiety. The US 10-year Treasury yield ticked slightly higher to close the week near 4.43%, underscoring the pivot toward equities as investor confidence improved. Bitcoin held steady above the $100,000 mark during the week, with continued institutional interest driving another round of net inflows into spot Bitcoin ETFs, signaling sustained appetite for crypto exposure alongside equities. Overall, the combination of strong price action, sector rotation into growth, positive fund flows, and firming sentiment paints a constructive picture for equities, with capital clearly reallocating into risk assets.

The latest results marked the fourth positive week out of the past six, as stocks continued to regain their footing following earlier declines. Historically, short-lived drawdowns—particularly outside of recessionary periods—are often followed by strong recoveries that present attractive return opportunities. See chart below. However, a composite of technical breadth indicators now suggests the S&P 500 is in overbought territory, increasing the likelihood of a near-term pullback or consolidation phase.

h/t: IsabelNet

The ES market gapped higher, reclaiming the key 5845 level along with the daily 200 MA—previously a significant resistance zone that now acts as support. Notably, the 50 MA has begun to flatten. As shown in the daily chart below, the market is currently trading within an upward channel originating from the April lows and is now nearing the channel’s upper resistance. Given the overbought conditions, there is a heightened risk of a short-term pullback.

As usual, I will do a brief recap of this week´s market action, followed by an analysis of the general markets and the various sectors, and conclude with an outlook for the upcoming week.

• Recap:

  The ES market began the week with a gap higher at the open, breaking out of the prior 7-Day Balance and achieving all of the upside targets laid out in the Bullish scenario of the previous Sunday Post analysis. It initially encountered a major resistance zone that included the daily 200 MA. However, momentum carried the market above this level, initiating a Bullish Imbalance phase. After pausing on Wednesday, the ES back-tested the 200 MA on Thursday before resuming its rally and closing near the highs for the week. Notably, the market dropped around 27 points in after-hours trading on Friday—a development worth monitoring in the coming week for potential follow-through. In addition, there are now Bearish divergences from the technical indicators on the 1-Hour and 4-Hour charts. Overall, the market remains in a constructive uptrend within this Bullish Imbalance phase.

• General Markets and Sectors:

  Check out the updated Charts Page which goes with this section.

  The S&P 500 gapped higher breaking above the 5762 resistance and daily 200 MA (now supports). The rally continued and the 5870 resistance was also broken, which is now immediate support. It is now about 3% away from the all-time high.

  The NDX/Nasdaq gapped higher breaking above the daily 200 MA and moving back inside the upward channel from the December 2022/January 2023 lows. Major supports are now at 20675 and 21171. It is now about 3.5% away from the all-time high.

  The Dow Jones gapped higher and consolidated around the daily 200 MA before moving higher to the 42700 resistance, which coincides with the downtrend line from the all-time high. Supports are at the daily 200 MA and 41915.

  Small Caps (IWM) gapped higher and consolidated around the downward channel resistance from the November 2024 high, which is near 212 - a key resistance level. Supports are at the 200 level and daily 50 MA.

  The FFTY index broke above the daily 200 MA (now support) and moved higher. It is now inside the upward channel from the October 2023 low.

  The $VIX continued to decline, breaking below the 20 level and moving to the March lows, which reflects a generally Bullish environment for equities. However, it may be oversold in the short term, potentially setting up for a bounce.

  Crude Oil rallied to the daily 50 MA which got rejected as expected. If the 50 MA is reclaimed, next resistances are at the $67 level and the downward channel resistance from the March 2022 high. Support is at $58.

  Gold sold off and broke below both the 3288 & 3210 support levels. It found support at the 3138 level and daily 50 MA. It is currently trading at the back-test of the upward channel from the February 2024 low and resistance is at 3288.

  The US 10-Year broke above the 4.40% resistance (now support) and rallied to the 4.57% resistance, which got rejected. It remains in the downward channel from the October 2023 high.

  The USDJPY rallied breaking above the daily 50 MA and moving back inside the upward channel from the January 2021 low. However, the 148.50 resistance got rejected and the market sold off breaking below the channel support and moving to the 145 support.

  Bitcoin consolidated between the 106175 resistance (aligns with the upward channel resistance from the October 2023 low) and the 101275 support. Could see a rejection in this area.

  Semis, SOX gapped higher moving back inside the upward channel from the October 2022 low and reclaiming the daily 200 MA. However, it still remains in the downward channel from the July 2024 high.

  Consumer Disc, XLY gapped higher and broke above the daily 200 MA. It is now approaching the upward channel resistance from the December 2022 low.

  The Retail sector, XRT gapped higher and broke above the 75 resistance, the downward channel resistance from the December 2024 high and the daily 200 MA. Need to see some follow through.

  The Tech sector, XLK gapped higher breaking above the daily 200 MA and moving back inside the upward channel from the October 2022 low. It is now approaching the all-time highs.

  Transports, IYT gapped higher and moved slightly above the daily 200 MA, where it is consolidating. It remains in the upward channel from the October 2022 low.

  Financials sector, XLF gapped higher and broke above a long-term resistance line. It is approaching the all-time high.

  The Materials sector, XLB gapped higher and broke the downward channel resistance from the October 2024 high. However, it remains within a long-term upward channel.

  Industrials, XLI gapped higher and rallied toward the all-time record highs. It remains in the upward channel from the March 2020 lows.

  The Health sector, XLV sold off to the downward channel support from the September 2024 high and then bounced back higher.

  Consumer Staples, XLP continues to consolidate around the daily 200 MA/50 MA and remains within the upward channel from the October 2023 low.

  Utilities, XLU back-tested both the daily 200 MA/50 MA and the upward channel support from the October 2023 low, before bouncing back higher. It is approaching the all-time record high.

  The Energy sector, XLE has been rangebound for over two years (shaded area) and is currently consolidating around the daily 50 MA after a gap higher.

• YEAR-TO-DATE RETURN:

  SPX S&P 500 +1.8%

  DJIA Dow Jones +0.9%

  IXIC Nasdaq -0.3%

  XLI U.S. Industrials Sector: +9.5%

  XLU U.S. Utilities Sector: +9.3%

  XLF U.S. Financial Sector: +7.1%

  XLP U.S. Consumer Staples Sector: +5.0%

  XLB U.S. Materials Sector: +3.9%

  IYT Dow Jones Transports: +1.6%

  XLK U.S. Technology Sector: +1.2%

  XLE U.S. Energy Sector: +0.6%

  SOX Semiconductor Index: -2.0%

  XLY U.S. Consumer Disc Sector: -2.7%

  XLV U.S. Health Care Sector: -2.9%

  XRT U.S. Retail Industry: -3.7%

• Week of 5/19/2025:

  Click link for complete Economic Calendar.

  United States - S&P Global manufacturing & services PMIs, existing & new home sales and speeches by several Federal Reserve officials.

  China - industrial production, retail sales, the House Price Index, fixed asset investment, FDI, and a pivotal interest rate decision.

  Japan - inflation data and trade balance.

  Germany - Ifo Business Climate Index.

  United Kingdom - retail sales and inflation data.

  Canada - retail sales, inflation and housing prices.

  Australia - central bank will announce its interest rate decision.

  S&P Global PMI - Australia, Japan, India, France, Germany, the Euro Area, and the UK.

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Market Analysis