Gains in US Equities this week constitute a technically bullish short-term breakout that should help SPX extend gains up to 5500-5600 before some stalling out (potentially by the end of the month). While this short-term breakout is certainly helpful towards helping Equities extend higher technically, the weekly downtrend and bearish momentum will likely take time to reverse. Thus, a two-step forward, one-step back type framework is likely to be in place in the foreseeable future. Despite Equities likely extending gains higher in the months ahead, the next month could prove quite choppy, technically speaking, and might not trend up as quickly as market bulls might expect. However, it does look likely that the early April lows represented an important low for Spring 2025, & shouldn’t be tested in a bullish framework in the coming months.    

Overall, Thursday’s rally proved to be a much-needed confirmation for market bulls, rising above the peaks from 4/9 on both SPX and QQQ and RSP (Equal-weighted S&P 500). This is a bullish development that should help SPX push higher above 5525, potentially to 5550-5600, before finding resistance early next week.

While 5500 wasn’t officially exceeded yet in SPX, the strength of the move over the last few weeks has been important in triggering positive signals out of breadth gauges like Zweig’s Breadth Thrust indicator. (Explained below.)

AAII data showed Percentage Bears at approximately 58% this past week, which represents the longest stretch of >50% readings ever.

The bottom line is that while a near-term “backing and filling” might be necessary in May following this rally, this looks to be a positive intermediate-term development that should eventually help US indices push back to new all-time highs, in my view.

As seen below, SPX’s entire consolidation from early April was exceeded on Thursday’s rally as of the close. Thus, while many harbor understandable hesitancy given the lack of a sufficient retreat on tariffs, the market seems to be pushing higher on a combination of good earnings coupled with good economic data.

I suspect today’s move can allow for SPX to reach 5550-5600 into late Friday and/or early next week before a possible consolidation gets underway.  However, I don’t suspect this will prove too damaging to the structure. Lows that were made in SPX back on 4/21 should not be undercut by any consolidation in this view.

S&P 500 Index

SPX has successfully accomplished its one-week breakout, and now lies near the larger challenge

As seen below, the breakout on Thursday helped SPX get very close to, but not above 5500. However, this is a positive breakout on QQQ and RSP, and SPX also managed to exceed early April highs despite not officially breaking its downtrend.

I expect this downtrend to be surpassed on Friday or Monday of next week, ahead of possible consolidation. Reasons for consolidation have to do with short-term exhaustion signals coupled with Elliott-wave (5-wave) patterns from 4/21 lows. Thereafter, a push back higher arguably should commence.

S&P 500 Index

Optuma charts show extremely bullish Advance/Decline ratios over the last couple weeks

While some investors might not be as convinced about the durability of this market bounce after just a few days of strength, it’s important to pay close attention to what breadth indicators are suggesting following an abnormally robust move off the lows for market breadth.

As can be seen below, the Advance/Decline ratio for S&P registered two of the highest readings in three years, within two weeks’ time.

Additionally, the breadth has been good enough to successfully trigger the Zweig Breadth Thrust, created and made popular by Martin Zweig.  Below is the chart for the Advance/Decline ratio for SPX, followed by the Zweig Breadth Thrust data going back over the last 45 years.

S&P 500 Breadth – Advance/Decline Ratio

Zweig Breadth indicator has officially registered a buy signal

The legendary market technician/market timer Martin Zweig developed this momentum indicator over 40 years ago that illustrates a “thrust” when, during a 10-day period, the average number of issues that are advancing on NYSE goes from below 40% to above 61.5%.

Simply put, this means the market went from being oversold to one of strength, but is not yet considered overbought on a daily or weekly basis.

Today, it was officially confirmed that this Zweig Breadth thrust had a 10-day Exponential Moving Average reading above 61.5%.

As can be seen below, the median return going forward tends to be quite positive following a period of abnormally high market breadth happening from extremely low levels.

While I suspect this helps to confirm that our April lows are in place, it’s right to reiterate that weekly momentum remains negative. Furthermore, a lot of work is required to help with weekly momentum and the technical structure’s improvement. At present, I view this as an intermediate-term bullish signal for US stocks.

XLK3.81%  has broken out above its two-month downtrend

It seems important that Technology has led this rally over the last couple weeks.  XLK3.81% , the SPDR Sector Technology ETF, has officially broken out above the entire downtrend from mid-February as of Thursday’s close. 

This is a very positive sign for Technology, given that this sector underperformed during the recent market setback. 

While there remains ample work left to be done on the upside to help momentum start to turn back to positive on weekly timeframes, these last couple of weeks have provided the necessary thrust off the lows to turn short-term momentum gauges back to positive territory.

I continue to view Technology as an Overweight, technically speaking.  As discussed over the last few weeks, Tech never officially broke its longer-term uptrend vs. the S&P 500 in relative terms on an Equal-weighted basis.  The decline held where needed at support and has begun to turn back higher.

SPDR Select Sector Fund – Technology

Alphabet (GOOGL8.10% )-  Breakout preceded today’s Earnings beat

GOOGL has now beaten numbers for nine straight quarters.   Despite the regulatory overhang with antitrust concerns and looming tariffs, GOOGL managed to produce an earnings print of $2.82, vs. the expected $2.08, a fairly sizable beat.

I discussed in Thursday’s Flash Insights that I expected that GOOGL8.10%  might trade up to $165, and post-market, it’s now at $167.15 at 6:00 pm EST.

Overall, I don’t expect that GOOGL has much more room on this initial runup off the lows before it begins to consolidate. The area at $165 up to $173 is important, and an area of Ichimoku Cloud resistance lies right near $167.

However, the gap is higher in the after-market, which could lead to a high volume gain on Friday at a time when US benchmark indices appear to be breaking out. Thus, while it’s right to be positive on GOOGL to make progress up to $181 in the months ahead, it’s thought that this might take some time.

Overall, I’m positive on GOOGL but suspect it could find resistance from Friday, 4/25, into early next week before a minor consolidation. Such a pullback would make GOOGL quite appealing technically from a risk/reward perspective.

Alphabet Inc (Google) Class A