What to Watch Update for Monday August 25, 2025

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Summary of "What to Watch" Video Update
The video analyzes market trends, categorizing charts into positive, negative, and watchlist indicators, with a focus on the market's reaction to Federal Reserve Chair Powell's Jackson Hole speech and upcoming economic data.
Key Points:
1. Market Context:
Last week, the market turned defensive ahead of Powell’s speech, expecting hawkish remarks. Instead, his comments were market-friendly, leading to a strong upward move on Friday.
August is historically weak in post-election years (negative since 1950), with one week left to potentially close positive.
Upcoming events: Second GDP estimate and core PCE (Fed’s key inflation metric). In the previous week, strong PPI data raised inflation concerns, but CPI was market-friendly.
2. Positive Indicators:
Market sentiment improved, with the VIX below 20 and declining, signaling lower volatility.
S&P 500 gained 0.27% for the week, driven by Friday’s rally, with broad participation (not just mega-caps).
Smart money indicators (accumulation/distribution, CMF, vortex) are positive, though lacking strong conviction.
Short-term, intermediate, and long-term trends remain positive but weakening, with the S&P 500 above key moving averages.
Broader market indices (Dow, Wilshire, total US stock ETF) hit all-time highs, and small/mid-caps showing strength.
Stocks-to-bonds ratios suggest a soft landing, with bonds underperforming stocks.
Home construction and real estate are improving, potentially aided by expected Fed rate cuts.
3. Negative Indicators:
Overhead resistance persists: S&P 500, NASDAQ, and NASDAQ 100 failed to close above key weekly resistance levels (e.g., S&P at 64.67 vs. 64.68 resistance).
Growth stocks (mega-caps) underperformed on Friday, raising concerns about leadership.
Volume lagged behind price, with negative divergences (price hits new highs, but volume did not).
Growth-to-value ratios are declining, with some dropping below moving averages, suggesting a defensive shift.
Momentum oscillators (PMO, TRIX, KST) are weak, with volume-based indicators trailing price.
Financial sector’s ratio to S&P is declining, needing follow-through to confirm recovery.
Dow Theory shows a negative divergence (Dow at all-time high, transports lagging).
4. Watchlist:
Jobless claims are rising slightly, with longer unemployment durations, though still below 2 million.
Volume remains below average, typical for August.
Investor sentiment (AAII survey) dropped, which could be contrarian-positive if markets break higher, driving FOMO.
Advance-decline lines show mixed signals: NYSE set a new high, but S&P volume lagging.
Equal-weight S&P outperformed the cap-weighted index, indicating broader participation but potential defensive shift.
Bond yield curve (10-year to 3-month choppy, with inversion risks signaling recession concerns.
Defensive sectors (staples, utilities) show mixed performance; tech-to-utilities and semi-to-tech ratios lack conviction.
Oil, bond spreads, and the US dollar (declining, aiding stocks) are monitored for geopolitical and economic impacts.
International markets (German DAX, US vs. global) and high-beta vs. low-beta stocks lack clear direction.
Bellwether sectors (semis, homebuilders, transports, retail, regional banks) show strength but need stronger conviction.
Key Question:
Will Friday’s rally mark the start of a sustained upward move, or will overhead resistance and defensive signals lead to a pullback? The S&P 500’s ability to close above 6468 and growth stocks regaining leadership are critical.

PDF of Slides:
https://drive.google.com/file/d/1aAhCOuFx678T8XWGnPc7ZXaxJD5Fxzjn/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!