What to Watch Update for Monday July 21, 2025

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Summary of What to Watch Video Update (Prepared for July 21, 2025)
This video update analyzes market trends for the S&P 500, categorizing indicators into positive, negative, and areas to monitor. Here's a concise summary:
Positive Indicators:
S&P 500 Trend: The S&P 500 is in an uptrend, staying above the 20-period moving average, with a constructive daily chart. Despite a mid-week dip due to news (e.g., Trump-Powell speculation), it recovered, closing slightly positive.
Growth vs. Value: Growth-to-value ratios (large, mid, small caps) are positive, with growth outperforming value. The blue line (growth) remains above the red line (value) intraday.
Sector Performance: Discretionary stocks are improving, outperforming defensive staples. Tech and semiconductors are strong, with the NASDAQ 100 and semiconductor ETFs setting recent all-time highs.
Risk Indicators: VIX below 20 signals positive annualized returns. Risk-on to risk-off and high-beta to low-beta ratios are rising, favoring bullish sentiment.
Advance-Decline Lines: Volume-based advance-decline lines are strong, and the NYSE, mid, and small-cap advance-decline lines remain above moving averages.
Smart Money Indicators: Modified MACD (Boom Indicator) and Chaikin Money Flow are positive, with short-term trends strengthening (green line above red line).
Bond Ratios: S&P 500 outperforming bonds (3-7 year), indicating a soft-landing expectation. Tech and NASDAQ 100 also outperforming bonds, reinforcing bullish sentiment.
Financial Sector: Holding up well despite some selling post-earnings.
Negative Indicators:
Momentum Slowdown: Short and intermediate-term oscillators (e.g., MACD, PMO, PPO, TSI, KST) are rolling over or flattening, reflecting recent sideways action.
Smart Money Indicator #3: Chaiken Oscillator dropped below the moving average, signaling short-term weakness.
McClellan Oscillators: Both S&P and NYSE oscillators are below zero, indicating declining momentum in price and volume.
Bullish Percent Index: Declining despite high readings, showing negative divergence.
Mass Index (Weekly): Triggered a potential reversal signal after crossing below the red dashed line.
Financials Underperformance: Financials are underperforming the S&P 500, with the ratio dropping below the 200-day moving average.
Zahorchak Method: Shifted to a full sell signal (-10) on a long-term basis.
Home Construction: Struggling compared to bonds, not yet turning positive.
Areas to Monitor:
Seasonal Weakness: Mid-July to October has seen declines over the last two years, raising caution for potential pullbacks (2-10%).
Volume: Below average, typical for summer, but a concern if it persists.
Sentiment: Exuberant at a 75 reading, suggesting a possible contrarian indicator if it remains extreme.
Pivot Points: Long-Term overhead resistance at 6468 (R1) for the S&P 500 and NASDAQ’s R1 level.
Jobless Claims: Initial claims are stable, but rising continuing claims could signal prolonged unemployment.
Bond Yields & Inflation: 10-year bond yields (US and Japan) and TIPS ratios are being watched for inflation concerns. CPI came in hotter than expected, while PPI was weaker.
Retail Sales: Stable but underperforming the S&P 500, indicating relative weakness.
Key Ratios: Discretionary-to-staples, tech-to-utilities, and biotech-to-healthcare ratios are positive but show slight weaknesses (e.g., hotels-to-utilities).
Bellwether Industries: Semiconductors and home builders are solid, but transports and regional banks are weakening or sideways.
Global Markets: The German DAX is in an uptrend, but US stocks are not leading international markets. Emerging markets show slight improvement but no breakout.
Dollar and Gold: A weaker dollar supports stocks, while gold-to-S&P ratio remains below a declining trendline.
Inflation Expectations: Rising CRB index and oil prices (geopolitical) warrant attention.
Key Question:
Will the S&P 500 keep climbing? The market is positive but shows vulnerabilities (e.g., negative divergences, seasonal risks, and high sentiment). A 2-10% pullback is possible but could be normal within the uptrend. Daily videos will track shifts in sentiment and momentum.

PDF of Slides:
https://drive.google.com/file/d/14MlMBqoF7YMW-JQxVnflib2AXVn1LbbM/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!