TECHNICAL ANALYSIS (by Intraday Dynamics)
Major Indices Week of May 16, 2025
NYSE Volume
S&P 500 Momentum ETF
Last week, the question was; “Who will win, the hedge funds who were selling or the small retail traders who continued to “buy the dip.?”” That answer was resolved with a massive gap higher on Monday following a reduction of tariffs on China and prices soared throughout the week with the Invesco S&P 500 Momentum ETF moving to all time highs. The tale is unusual as the score is Retail: 1 – Hedge Funds: 0. A highly untypical event.
The story is a confluence of a triple breadth thrust, which is also very unusual. We now have the Zweig Breadth Thrust (ZBT), the deGraaf Breadth Thrust AND a Triple 70 Breadth Thrust readings, all contributing to a massive surge of buying, on relatively low volume. It was a week of panic short covering by large funds and it has shifted sentiment to greed and extreme greed on most readings…just one short month after seeing those readings in extreme fear. In addition to all the thrust indicators, last week was one of Call Walls and Dark Pools as massive trade took place near Friday’s expiring options of 5900 and 5950 in the SPX, 350 on TSLA and 135 on NVDA as well as 19K and 21K on the Nasdaq indices.
“Hedge funds capitulated with second biggest short covering panic on record during Monday melt-up 🚀 On Monday, the Goldman Prime Brokerage Global equities book saw the second largest notional net buying in 5 years (+4.3 sigma), driven by short covers and to a lesser extent long buys (1.6 to 1). All regions were net bought, led by North America and to a lesser extent Europe (both led by short covers). Goldman HF Prime report shows that hedge funds net bought US equities at the fastest pace since Apr 9th (+4.0 sigma one-year), driven by short covers and long buys (1.5 to 1). Single Stocks / Macro Products were both net bought and made up 53% / 47% of the total notional net buying, led by short covers / long buys, respectively.” Source: Goldman, zerohedge
Tech stocks led the way, and the MAGS violated the 50 level H&S pattern which voids out the intermediate-term outlook for that index. The Dow closed at the highest level since 25 March 2025 and this is a pivotal area for the charts. The SPX closed at the highest level since 24 February 2025 and almost all of the major U.S. indexes are now higher for the year. The Russell and both Nasdaq indexes are now in “new bull markets” with their rallies off the lows in April.
Monday/Tuesday marked CRITICAL cycle timing, however, the bullish action does not change my long-term outlook for the cycles for 2025 with late summer and fall of this year looking very troublesome for the markets. See below.
After markets closed on Friday, Moody’s lowered the United States’ credit rating (the first time since 1917) and that hit the SPDR-SPY by a full percent following the close. The move in SWAPS has been predicting something like this was coming, it was simply a matter of time. Yields on the 30YR jumped.
He Who Laughs Last?
If you have never listened to Warren Buffet laugh, it might be time to pay attention to the old man (the one who is sitting on $348 billion in cash)…because the reality remains that VALUE is stretched to extremes. The question now will come down to Buffet versus the retail trader. Buffet made some moves last week, reducing some of his holdings and adding to positions with his largest increase in STZ: Constellation Brands. The “Buffet Indicator” continues to show an extremely overvalued market. Stocks like STZ and PM have rallied recently…these are often seen as recession indicators, e.g., cigarettes and booze.
In addition, a couple of large traders are making big moves this past week. Both Tom DeMark and Michael Burry (of The Big Short fame). Here is DeMark’s take on the SPX.
“An ensuring (sic) decline could take the S&P 500 back to its April lows near 4,835. If so, that would represent a 20% drop from its February highs, putting it squarely into bear market territory. “Historically, markets don’t bottom on good news, like last month on positive trade developments,” DeMark said. “Stocks typically bottom when everything is terrible and everyone is forced to throw in the towel — but that hasn’t happened yet. Stocks were just way oversold and overdue for a bounce.” –Tom DeMark
In the case of Michael Burry, he went 100% short on Thursday…liquidating all his holdings and buying puts on every trade in his account, going heavily short on NVDA with 900K shares. Maybe he has some foreknowledge of the soon to drop DeepSeek R2? The leaks have been out for almost two months and when the announcement drops it will likely be a Black Swan that hits the chip stocks.
Consumer sentiment took another massive hit with that reading hitting the lowest level since 1981 and expectations dropping below the Covid lows. Inflation expectations soared and job risk sentiment hit the highest levels since the Great Recession.
Do we also have a portending housing bubble on the horizon?
SPY Daily Candles
As mentioned, sentiment has shifted sharply to greed and extreme greed with the strong rally. The volume remains weak overall. Historically, what happens to the SPX after the percentage of stocks hitting a 20-day high crosses 50%+?
The Nasdaq has also reached an overbought level once again while the Goldman Sachs Bull/Bear indicator has risen back to ‘recession indicator’ levels.
The Moody’s downgrade is partially a result of the “Trade War” as it is causing a flight from U.S. assets.
S&P 500 Stocks Above 50-Day Average
The rally has taken the number of stocks in the SPX above the 50-day MA back to October 2024 levels.
SPX Daily Candles
Updating the longer-term timing analysis:
“It is looking more and more, from a cycles standpoint, that this will run well into Q4 2025/Q2 2026. Thus, a much more protracted and drawn-out bear and not the “flash crash” that everyone has gotten used to over the past two decades. That doesn’t mean we won’t have significant rallies, but chasing rallies is likely to be a losing strategy until this thing is spent…which very likely will not be until Q1/Q2 2026 at this point. The BIG focus will be late summer and fall of 2025…particularly late September this year.”
MAGS (Magnificent 7) Daily H-L-C
The MAGS (Magnificent 7) gapped over the critical right shoulder level of 50 on the developing H&S pattern and this changes the intermediate-term outlook for the chart. It ended up +9.50% on the week and is now testing a key level at 53.16. Daily closes over 53.16 will increase the bullish view for the chart and open potential for a test of the highs.
The RSP:SPY closed lower even with the bullish move in the Russell. The IWM now has six bullish candles in a row as it closed up +9.04% on the week. The RSP also has six bullish weeks and settled the week up +7.42%. NVDA exploded +16.07%, meeting the Call Wall at 135 as there was massive call volume at 135 which expired on Friday. Bitcoin stalled out after testing the all-time highs and closed down about -1% for the week in a Doji. McClellan Oscillators are confirming the rally in the Dow. The Yield Curve closed out the week slightly lower at +0.452%. The 10YR yield soared above 4.50% mid week and closed higher at 4.445%. Truflation jumped to 1.85%. The 30 Year bond tested the 5% level midweek before backing off on Friday…but surging on the Moody news.
10YR-2YR Yield Curve Daily
VIX Daily Candles
The VIX plunged back under the 20 level retesting the levels last seen at the March 2025 highs. The US Dollar closed the week higher for the fourth week in a row as it builds a flagging pattern on the daily and weekly charts.
Nasdaq 100 Weekly Candles
Daily Breadth 
Breadth moved up sharply to new highs for 2025 and sentiment now reads extreme greed.
CNN Fear & Greed Index
AAII Investor Sentiment Survey
Sentiment moved to greed and extreme greed on several fronts. The CNN Fear and Greed Index moved up to 71 and now reads greed. It has reached the highest levels since October 2024. Breadth moved up sharply to new highs for 2025 and sentiment now reads extreme greed. Latest AAII Sentiment Survey: Pessimism Drops. The Dow A/D ended at 6882, this is a new record high…even with prices off the records. The VIX plunged and closed on the lows, down -21.28% on the week. The Put/Call dropped to 0.66 and now reads greed. The 52-week, A/D moved up to +0.81% and now reads greed. The Dow closed the week up +3.41%, closing on the top of a gap range. The S&P soared +5.27% on top of a sharp gap week higher. The Nasdaq Composite was up sharply +7.15% and the Nasdaq 100 was up +6.81%. The FANG led the way higher, closing up +7.55%. The Russell was up +4.46%, posting the 6th weekly gain in a row. The 10-year notes closed lower in the middle of the weekly range. The yield on the 10YR increased to 4.455%.
The CRB Index closed +1.40%. Crude oil closed higher in the middle of a tight week’s range as it holds the critical $60 level. Gold was down sharply as prices took out the $3200 level of the downside. The CoT for the S&P 500 saw non commercials exiting (short covering?) and dealers adding. The CFTC S&P 500 Non-Commercial Net Positions plunged to -122.2K. Sellers have a 6 day window.
Timing Points
Tuesday is minor timing. Monday, we get the Leading Economic Indicators (est: -0.9%). Thursday is Flash PMI (est: 50.8, manufacturing 40.8). Friday is New Home Sales (est: 700K). The next CRITICAL timing point is 29 May 2025. Note that PCE is out on the 30th. 
- 05/20 **
- 05/29 *** X critical
- 06/05 **
- 06/09 *** X bonds
- 06/16-18 *** X critical, volatility/volume/wide ranges/extremes
Dow Jones Industrial Average
Dow Jones Industrial Average Weekly Candles
The Dow was up sharply +3.41% on the top of a gap weekly range. The weekly close is the highest since 3 March 2025. The daily is now severely overbought with prices above all the moving averages. The daily stochastics are extremely overbought and the MACD has reached overbought conditions. The RSI is now in overbought territory at 70.80. The weekly stochastics have hooked higher from oversold conditions. The next critical area overhead is the 26 March 2025 high at 42822 and the ‘final’ “Death Zone” from record highs. That zone is 42943 through 43061. The 200-day MA starts the week at 41606 and is trending slightly higher.
Dow Jones Industrial Average Weekly H-L-C
Resistance is now critical at 42822 and the Death Zone level at 42943 through 43061 area. Daily closes above 43061 should minimally test 44034 and will open potential for a test of the all-time highs at 45050/45054/45074. Closes over 45074 opens counts toward 45244 and 45426 (Fibonacci target). Rallies with closes over 45426 will reopen longer-term monthly targets in the 47400 level with targets of 46568 and 46954.
Dow Jones Industrial Average Hourly H-L-C
The hourly is extremely overbought on Friday’s close. Support is at 42318 and 42108. A breakdown under 42108 sets up 41938 with counts to pivotal near-term support at 41769/41765. A breakdown under 41765 sets up 41235. Closes under 41235 opens potential to 39638/39636 with support at 39933/39330. Closes under 39636 offer full counts to pivotal short-term support of 38923/38920. A breakdown under 38920 are bearish for a test of 38124 through 38039. Closes below 38039 should minimally test 37900 through 37828 and would open counts to retest the 36611 low with support at 37103.
| Resistance | Support |
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S&P 500 Cash Index: SPX
S&P 500 Index Weekly H-L-C
The S&P gapped higher and closed higher every day of the week to end on the top of the week’s range at the highest daily close since 24 February 2025. The daily chart is now in extreme overbought conditions with sentiment in extreme greed. The stochastics are overbought, the MACD is overbought and the RSI is hot at 79.8. Interesting that the 50-day MA is now positioned for a Golden Cross just one month after issuing a Death Cross. The weekly has turned up from oversold conditions. The hourly is overbought on Friday’s close with a preliminary bearish divergence. The 200-day MA is 5652.26 and is creeping higher from its down trend.
S&P 500 (SPX) Weekly Candles
A further breakout over 5986 has full potential to 6043 and opens counts to 6112/6114 and full counts into critical resistance at the intraday high of 6147.43. Rallies through 6148 should test 6160 with a shot at a target of 6180.35/6181. Closes over 6181 open counts to 6224 and 6296. Above 6296 can carry to 6368 with counts into the 6440 area. Closes over 6440 will open counts to 6584. A breakout over 6584 sets up 6638 and 6692.
S&P 500 Index Hourly H-L-C
Support is 5922, 5911 and 5900/5898. A breakdown under 5898 should test 5868 with counts to 5813. Closes under 5813 sets up a test of pivotal support at 5768/5765. Closes under 5765 suggest 5723/5720 and 5693 and fill counts to 5529. Closes 5529 will open counts to 5396 with potential to pivotal near-term support at 5264/5260. A breakdown under 5260 sets up 5115/5100 with potential to open intermediate-term counts for a retest of the 4835 swing lows with support still at 4884/4880. Closes under 4880 are bearish and open counts to 4614 through 4586.
| Resistance | Support |
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Charts courtesy of CQG, Inc., CNN, Koyfin, Trading View and AAII
