Weekly Trader's Outlook

If you read the last week's blog, you might recall that I had a "Slightly Bearish" forecast for this week, acknowledging that the SPX/$COMP could hit fresh highs early in the week, but then could end up net-net slightly lower by today. At the time of this writing, the S&P 500 is at fresh all-time highs, up ~2.3% on the week, and the Nasdaq Composite is also at fresh all-time highs, up ~4.4% on the week, so my forecast turned out to be wrong. The performance illustrates why it can be treacherous to go against the trend when investing/trading. The driving engine behind this week's push higher in stocks continued to be the artificial intelligence (AI) infrastructure plays, especially in the chip stocks. AMD reported earnings on Tuesday and helped fuel additional bullish momentum as AMD CEO Lisa SU once again revised longer-term growth expectations higher. The continuous data points from the chip companies suggest that compute demand still outstrips supply, which in turn provides traders with justification to bid up chip stocks. The PHLX Semiconductor Index (SOX) is up a staggering 64% off the March 30th lows and is trading at fresh all-time highs today (more on this in the "Technical Take" section below), assisted by a 13% jump in Intel on a WSJ report of a partnership with Apple.

Regarding the Iran conflict, there was a mix of news this week, and markets still appear hopeful that a peace plan between the U.S. Although there have been several reports of shots fired in the Strait of Hormuz, it doesn't appear to have violated the ceasefire. Stocks rallied on Wednesday following reports that U.S. envoys Steve Witkoff and Jared Kushner drafted a 14-point memorandum to end the war, and Iran subsequently indicated that it is "under review." WTI crude oil prices are up slightly today to $95.24/barrel, but down roughly 6.5% from last Friday.

Regarding the status of the Q1 earnings scorecard, out of the 443 S&P 500 companies that have reported, 73% have beat on the top line and 82% have beat on the bottom line. Q1 revenue growth has been tracking at 10.43% while EPS growth is 25.28% thus far, a slight drop on both metrics from last week.

At the time of this writing (2:45 p.m. ET) stocks are mostly higher, though off the highs of the session (DJI - 36, SPX + 56, $COMP + 380, RUT + 16). Both the S&P 500 and Nasdaq Composite hit fresh all-time highs today. This morning's stronger-than-expected monthly jobs report appears to be reinforcing the notion that the labor market is firm, and the AI secular growth story will continue to support economic growth, regardless of higher oil prices and no rate cuts from the Federal Reserve. Are markets too complacent? It's tough to say, given that the global economy is experiencing the largest CapEx boom in history, and earnings estimates continue to be revised higher. The bullish momentum can persist longer than most investors think, and as long as dip buyers get rewarded with higher prices it can reinforce the dip buying behavior. Additionally, when stocks are stair-stepping higher into fresh all-time high territory, there really isn't any technical resistance and the process of price discovery suggests a "fair value" hasn't yet been found. Are stocks near-term overbought? Yes, but that doesn't tell you when a pullback will occur. As I mentioned in the "Technical Take" section below, I suspect that if tech stocks continue to plow higher into Nvidia's earnings on May 20th, I would be concerned that the Nasdaq could be susceptible to a sell-off once that event is in the rearview mirror, but that's still 12 calendar days away. Heading into next week, the earnings calendar is much lighter, we'll get the monthly inflation reports (CPI/PPI) on Tuesday/Wednesday and President Donald Trump is scheduled to meet with President Xi Jinping in China on Thursday/Friday. And of course, markets will be monitoring Middle East headlines for any progress or degradation of peace talks between the U.S. and Iran. As for the near-term technicals, the RSI on the Nasdaq 100 is at an eight-year high, so a period of healthy consolidation could occur at any time, but we just don't know if that will be sometime next week. The velocity of the rally in some of the chips stocks is impressive (for example INTC and MU are up 14%, SNDK up 15% today alone), but a bit concerning in terms of sustainability. Having said that, it's also difficult to go against the trend or the bullish momentum. I'm not sure about where we land by next Friday, but I feel the potential to get some intra-week volatility, especially in chips/tech is elevated, so I'll provide a "Volatile" forecast for next week. I acknowledge that the AI infrastructure trade could continue to push higher next week, and even into Nvidia earnings, but I believe the potential for an intraweek pullback, even if its met with more dip buying, could manifest next week.

Monday (May 11): Existing Home Sales

Tuesday (May 12): Consumer Price Index (CPI), Treasury Budget

Wednesday (May 13): Producer Price Index (PPI), EIA Crude Oil Inventories, MBA Mortgage Applications Index

President Trump is scheduled to meet with President Xi Jinping in China on 5/14-15

Thursday (May 14): Business Inventories, Continuing Claims, EIA Natural Gas Inventories, Export Prices, Import Prices, Initial Claims, Retail Sales

Friday (May 15): Capacity Utilization, Empire State Manufacturing, Industrial Production

• Monday (May 11): AECOM (ACM), AST SpaceMobile Inc. (ASTS), Barrick Mining Corp. (B), Circle Internet Group Inc. (CRCL), Constellation Energy Corp. (CEG), Figure Technology Solutions Inc. (FIGR), Fox Corp. (FOXA), ICON PLC (ICLR), Mosaic Co. (MOS), Ovintiv Inc. (OVV), Petroleo Brasileiro SA Petrobras (PBR), Simon Property Group (SPG)
• Tuesday (May 12): Aramark (ARMK), CAE Inc. (CAE), Ecopetrol SA (EC), Franco-Nevada Corp. (FNV), JD.com (JD), Karman Holdings Inc. (KRMN), Nextpower Inc. (NXT), Oklo Inc. (OKLO), On Holding AG (ONON), PagSeguro Digital Ltd. (PAGS), Qnity Electronics Inc. (Q), Sea Ltd. (SE), Venture Global Inc. (VG)
• Wednesday (May 13): Alibaba Group Holding Ltd. (BABA), Birkenstock Holdings PLC (BIRK), Celcuity Inc. (CELC), Cisco Systems Inc. (CSCO), Dynatrace Inc. (DT), Korea Electric Power Corp. (KEP), Nebius Group NV (NBIS), Takeda Pharmaceutical Co. (TAK), Tower Semiconductor Ltd. (TSEM), USA Rare Earth Inc. (USAR)
• Thursday (May 14): Applied Materials Inc. (AMAT), Brookfield Corp. (BN), Bullish (BLSH), Dillard's Inc. (DDS), Credicorp Ltd. (BAP), Figma Inc. (FIG), KE Holdings Inc. (BEKE), NetEase Inc. (NTES), NU Holdings Ltd. (NU), Viking Holdings Ltd. (VIK)
• Friday (May 15): Alumis Inc. (ALMS), Arrivent Biopharma Inc. (AVBP), Flowers Foods Inc. (FLO), H World Group Ltd. (HTHT), RBC Bearings Inc. (RBC), RLX Technology Inc. (RLX), Xpeng Inc. (XPEV)

There was a solid dose of economic data for markets to digest this week, highlighted by this morning's monthly jobs report. U.S. employers added 115,000 jobs in April, which was well above expectations, and March payrolls were revised higher by 7K. Job losses were most pronounced in the Information (tech) sector, which has seen 16 consecutive months of job losses. On the flipside, education and healthcare contributed the most to job gains. The other two labor market reads, Job Openings and Weekly Claims, both support the notion of a stable labor market. Elsewhere, consumer confidence, as measured by the University of Michigan's survey, registered a fresh record low. However, that attitudinal measure hasn't really translated into consumer behavior, as recent readings on consumer spending appear firm, despite higher oil prices. Here's a breakdown of the reports:

Nonfarm Payrolls: Headline payrolls rose by 115,000 in April, which was well above the +65,000 economists were expecting. Additionally, March payrolls were revised up to 185,000 from the initial report of 178,000.

Unemployment Rate: Remained at 4.3% from the prior month and in-line with estimates.

Average Hourly Earnings: Increased 0.2% versus +0.3% expected.

Labor Force Participation: Dropped by .01% from the prior month to 61.8%.

Average Workweek: 34.3 versus 34.2 expected

ADP Employment Change: U.S. private employers added 109K jobs in April, which represents the strongest month job growth since January of 2025 and above the +63K expected.

JOLTs-Job Openings: Declined 56,000 in March to 6.886M from the prior month, but above the 6.835M economists were expecting.

ISM Non-Manufacturing Index: Declined slightly to 53.6% in April from 54.0% in March, though remains firmly in expansionary territory (> 50.0). The Prices Index was unchanged from the prior month at 70.7, which matches the highest level since October of 2022.

Factory Orders: 1.5% vs. 0.3% est.

Construction Spending: -0.2% vs. +0.1% est.

New Home Sales: Rose 7.4% in March from the prior month to a seasonally adjusted annual rate of 682K, which was above the 650K economists were expecting.

Productivity-Preliminary: 0.8% vs. 1.6% est.

Unit Labor Costs-Preliminary: 2.3% vs. 2.5% est.

Wholesale Inventories: 1.3% vs. 1.1% est.

University of Michigan Consumer Sentiment: Declined 3.2% from April to a record low of 48.2 in May, which was below the 50.1 economists were expecting. The current conditions index declined 9%, as concerns around high prices for both personal finances and major purchases weighed on sentiment.

EIA Crude Oil Inventories: -2.31M barrels

EIA Natural Gas Inventories: +63 bcf

Initial Jobless Claims: Initial applications for US jobless benefits increased 10K from last week's 50-year low of 190K to 200K, which was below the 205K economists had expected. Continuing Claims decreased 10K from the prior week to a seasonally adjusted 1.766M, which was below the 1.80M expected.

The Atlanta Fed's GDPNow "nowcast" for Q1 GDP was revised up to 3.7% today from 3.5% on Tuesday. The increase was primarily driven by consumer spending (PCE) and nonresidential fixed investment.

U.S. Treasury yields were higher to start the week but have subsequently eased and are little changed from last Friday. The yield curve experienced some modest flattening. Compared to last Friday, two-year Treasury yields ticked up ~1 basis point (3.895% vs. 3.888%), 10-year yields declined slightly (4.37% vs. 4.378%), while 30-year yields decreased ~2 basis points (4.949% vs. 4.966%).

Market expectations around the Federal Reserve's monetary policy continued to move in favor of a potential cut, though conviction remains low. Per the Bloomberg rate probabilities, markets are putting a roughly 27% chance (from 17% last Friday) of a rate hike at the March Federal Open Market Committee (FOMC) meeting and a 32% chance (from 21%) of a rate hike at the April 2027 FOMC meeting.

The Nasdaq 100 index (NDX) continued to surge higher this week, now up 27% off the March 30th lows. Obviously, the tech index contains not only mega-cap tech, but many of the AI infrastructure plays like chips stocks. The Relative Strength Index (RSI), which measures momentum on this index, is currently at 82, the highest levels since 2018 when it hit 84. I've stated it before in this blog and I'll state it again, an overbought reading on the RSI (>70, or >80 in bull markets) does not mean that a pullback is imminent (it's not a timing tool), but it does suggest one could be on the horizon. Over the past 10 years when the NDX has pushed above the 80 level on the RIS, it is typically within a week of some degree of mean reversion. Therefore, breaking out to new all-time highs is bullish from a longer and intermediate-term perspective, but the near-term technical outlook is "cautious" given the potential for some digestion of gains.

Near-term technical translation: Intermediate and longer-term bullish, near-term cautious

Last week I had a long-term bullish, but near-term cautious outlook on the PHLX Semiconductor Index (SOX), acknowledging the (then) new high for the index, but with tentative price action. This week the SOX continued to push higher into record territory, only pulling back 2.7% yesterday, which was then met with "buy the dip" activity. The SOX is currently up 64% from the March 30th lows and is 59% above its 200-day Simple Moving Average (SMA). The SOX is in a similar position to the NDX referenced above–it's in overbought territory but that doesn't tell you when a potential pullback will manifest. Last week, I suggested that traders might want to be on the lookout for two signals that a near-term consolidation period may occur: a) a bearish reversal pattern on the daily candlestick, such as bearish engulfing candle, dark cloud cover, shooting star, evening star, bearish abandoned baby, three black crows, bearish harami; or b) a negative divergence in the RSI. Currently, we don't have either on the chart. Therefore, technicans generally respect the trend, respect the bullish momentum, but also with the understanding that mean reversion could occur at any time. Nvidia reports on May 20th, so maybe the SOX can rally into that report, but if it does, I believe a "sell on the news" reaction could occur with bullish earnings catalysts in the rearview mirror (I get it, it's a lot of "ifs," but I'm just trying to provide some helpful thought analysis to navigate a parabolic move like we're seeing in the SOX). Until then, I'll stand with the technical outlook I provided last week, which includes a near-term "cautious" stance.

Technical translation: Intermediate and longer-term bullish, near-term cautious

The Bitwise 10 Large Crypto Index is up 2% week over week, with bitcoin up 3% and ether flat at the time of writing this on Friday. Bitcoin is up 33% from its early February lows. Ether, which peaked last August, declined 65% in the bear market. Sol, which peaked in late January, fell 77% to its trough. Since bottoming in early February, both sol and ether are up roughly 30%. "A Dream of Spring Amid Crypto Winter" established a more favorable view on bitcoin, a neutral stance on ether, and a less favorable view on sol.

Investors may question why altcoins are not as favored in the recovery. On-chain activity for ether and sol provides context. Annualizing Ethereum's year-to-date GDP (total fees generated across the network) implies roughly $7.8 billion, or 11% below 2025 GDP based on data from Token Terminal. Solana's year-to-date annualized GDP is approximately $1.5 billion, down 69% from 2025 levels. Ethereum activity has been relatively stable since the market bottomed, whereas Solana's GDP continues to decline month-over-month. The previous crypto cycle bottomed in November 2022, and since then, annualizing monthly GDP yields an average of about $7 billion for Ethereum and nearly $3 billion for Solana. Ethereum's current run rate is above its historical average, while Solana's remains roughly 50% below. As a result, investors may view ether as the more attractive asset on a fundamental basis.

With Solana's activity still contracting and Ethereum's showing signs of stabilization, valuation becomes the key question. Ether has historically traded between 40x and 70x market cap-to-GDP, though it currently sits below this range at roughly 35x. Sol has historically traded between 20x and 100x and now trades near 36x. Understanding what drives the rerating of an investment is important. Equity investors often reward a stock whose fundamentals are improving with a higher multiple. Multiples can rise for the wrong reasons too—such as when the earnings shrink relative to the price. Ether's recent re-rating appears supported by improving fundamentals, while sol's reflects multiple expansion against declining activity.

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, the S&P 500, Nasdaq and Russell 2000 all notched fresh all-time highs this week, but there was little movement in market breadth. In fact, market breadth on the SPX contracted from last week. This continues to suggest relatively narrow market leadership. Compared to last Friday, the SPX (white line) breadth dropped to 56.80% from 58.52%, the CCMP (blue line) ticked up to 45.14% vs. 44.01%, while the RUT (red line) saw the most improvement, rising to 62.65% from 60.97% (all week-over-week).

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (102 today): Archer Daniels Midland Inc. (ADM - $0.14 to $77.39), Amazon.com Inc. (AMZN + $1.35 to $272.55), Caterpillar Inc. (CAT + $11.88 to $907.57), Cisco System Inc.  (CSCO + $3.30 to $95.46), Intel Corp. (INTC + $7.70 to $117.32), Micron Technology Inc. (MU + $40.75 to $714.39)

This Week's Notable 52-week Lows (69 today): Abbot Laboratories Inc. (ABT - $1.13 to $85.88), Builders FirstSource (BLDR - $1.07 to $78.34), Clorox Company (CLX + $0.41 to $92.52), Cintas Corp. (CTAS - $1.92 to $168.12), Home Depot Inc. (HD - $1.17 to $321.46), Lululemon Athletica Inc. (LULU - $1.54 to $132.05)