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With all eyes and ears on this week’s Fed assembly, it is price taking an enormous step again to mirror on situations associated to momentum, breadth, and management.  And whereas the rally of the early April lows has been vital, the S&P 500 and Nasdaq 100 now face appreciable resistance on the 200-day transferring common.

With that backdrop in thoughts, listed here are three charts we’re watching that haven’t but signaled an “all clear” for danger property.

Our Market Pattern Mannequin Stays Medium-Time period Bearish

Lengthy-time market e-newsletter creator Paul Montgomery used to level out that essentially the most bullish factor the market can do is go up. The best way we make this easy evaluation of market pattern is utilizing our Market Pattern Mannequin.

As of final Friday’s shut, our Market Pattern Mannequin exhibits a short-term bullish sign, given the power off the early April low. The medium-term mannequin, nonetheless, stays bearish, because the current bounce continues to be outlined as a bear market rally. If the S&P 500 can push above its personal 200-day transferring common, that may doubtless be sufficient to maneuver the medium-term mannequin to the bullish aspect for the primary time since October 2023.

Through the years, I’ve discovered the Market Pattern Mannequin to be a incredible means of separating the short-term “flickering ticks” of day-to-day market actions from the extra vital shifts in sentiment from bullish to bearish. And by staying on the precise aspect of this mannequin, I have been in a position to seize many of the market upside, and extra importantly, keep away from disastrous bear phases!

Do not miss our every day market recap present, CHART THIS with David Keller, CMT. We’ll observe how these charts evolve via the course of the week, spotlight key shares on the transfer, and boil down an important market themes from a technical perspective. Be part of us dwell each buying and selling day at 5pm ET, or catch the replay on our YouTube channel!

Will Key Shares Breakout Above the 200-Day?

Whereas the S&P 500 and Nasdaq 100 are testing their very own 200-day transferring averages, many S&P 500 members are in a really related place. On the April 2025 market low, lower than 10% of the S&P 500 shares have been above their 50-day transferring common. That studying has reached virtually 60% this week as actually half of the S&P 500 members have regained this short-term transferring common.

Whereas the underside panel exhibits the % of shares above the 50-day transferring common, the subsequent panel up shows the % of S&P 500 members above their 200-day transferring common. Whereas this has additionally elevated during the last month, it nonetheless stays under 50%.

The countertrend rally in March 2025 noticed this indicator go as much as 50% after which reverse decrease, offering a warning signal of additional lows to return. Will we see an identical stall on this indicator in Might 2025? If that’s the case, that would point out a retest of the April low. However, if each of those gauges push above 50%, then traders ought to brace for a lot additional upside for the S&P 500.

Offense Must Dominate Protection

Management themes might turn out to be extremely necessary, as many main progress shares stay able of technical weak spot. And except the highest progress shares go into full rally mode, it is laborious to think about significant upside for the S&P 500 and Nasdaq 100. One solution to think about this relationship is to chart the ratio between Client Discretionary and Client Staples.

The highest panel exhibits the cap-weighted sector ETFs, and the underside panel exhibits the identical ratio utilizing equal-weighted sector ETFs. Each of those ratios made a serious peak in Q1 2025, and each of them trended decrease right into a mid-April low. During the last three weeks, we have seen a dramatic upside reversal in these offense-defense rations, indicating a rotation from defensive to offensive positioning.

Fairly merely, I do not see the main averages pushing greater except these ratios proceed to realize floor to the upside. We now have noticed power in some Client Staples names, from Kroger (KR) to Coca Cola (KO), however it could take charts like Amazon (AMZN) making a big transfer greater to offer the S&P 500 any actual likelihood of pushing above its personal 200-day transferring common. This ratio transferring greater would affirm that “belongings you need” are outperforming “belongings you want”, and that has bullish implications for danger property.

Traders are going through extra uncertainty than ever as we brace for the most recent Fed announcement, the latest tariff headline, and blended ends in the type of financial indicators. By watching charts like these, and retaining a watchful eye on the up to date Market Abstract web page, StockCharts customers can strategy these markets with confidence.

RR#6,

Dave

P.S. Able to improve your funding course of? Take a look at my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Analysis LLC

Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your individual private and monetary scenario, or with out consulting a monetary skilled.

The creator doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the creator and don’t in any means characterize the views or opinions of every other individual or entity.