Looking for breakout stocks and top market leaders? Follow along Mary Ellen shares stock breakouts, analyst upgrades, and sector leadership trends to help you trade strong stocks in today’s market.

In this week’s episode, Mary Ellen reveals the stocks leading the market higher and explains what’s fueling their strength. She highlights base breakouts, analyst upgrades, and leadership stocks gaining momentum. In addition, she screens for emerging breakout candidates you should have on your radar.

This video originally premiered May 16, 2025. You can watch it on our dedicated page for Mary Ellen’s videos.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

We’ve all heard the classic market maxim, “Sell in May and go away.”  For many investors, that’s the introduction to market seasonality that suggests a six month period where it’s just best to avoid stocks altogether.

Through my own experience, complemented with interviews with seasonality experts like Jeff Hirsch of the Stock Traders Almanac, I’ve learned to treat seasonal patterns as tendencies instead of certainties.  Seasonal patterns tell you what is likely to happen, barring any external forces that would cause the markets to deviate from their normal seasonal patterns.

“Sell in May” is Really About Weakness in Autumn

We can use the seasonality charts on StockCharts to try and identify patterns going back through years of market history.  We’ll start with 20 years of data, from 2005 to 2024.  Each bar represents the percent of the observations where the month ended higher than it began.  The numbers found at the bottom of each bar shows the average return for that calendar month based on the years in question.

Going back for the last 20 years, we can see that the March-April-May period is actually fairly strong.  Those months have been up 75-80% of the time, representing the most consistent three-month period of all.  But note how the next five months, with the exception of a pretty strong July, are basically the weakest part of the year?

Join us for a FREE webinar on Wednesday 5/21 at 1:00PM ET as we present “Sell in May 2025: Seasonal Strategy or Outdated Myth?”  We’ll dig deeper into the history of “Sell in May,” analyze summer trends in recent years, and focus on signs to follow in the weeks and months ahead!  Sign up HERE for this free event!

It turns out that the reason why “sell in May” has often worked out is less about May being super weak, but more about how major lows have usually come in the fall months.  Since the COVID low in early 2020, we’ve experienced major lows in September or October every year except for 2024.

Spring and Early Summer Have Been Crazy Strong

When we focus on the last five years, we can see that the May-June-July period has been consistently strong.  In fact, May and July have seen bullish trends every year since 2019.  So while investors often talk about the “summer doldrums” and weakness into the hot summer months, the recent evidence would suggest otherwise.

The weakest months since the COVID low have actually been January, February, September, and October.  So again, it’s been less about weakness in the spring, and much more about weaker price action into the traditional low in September or October.  Also note the strength in November, where the market is almost always rallying off a major low and setting up for a positive finish to the calendar year!

Will 2025 Follow the Normal Seasonal Pattern?

As I mentioned earlier, I like to think of seasonal patterns as tendencies.  There is no guarantee that July will be strong, and there is no way I can tell you for sure that the market will make yet another major low in September.  Seasonality tells you the general bias to the markets, but mindful investors know the most important evidence is price itself.

Given the extreme rally off the early April low, we’ve seen a rapid rotation from bearish sentiment to more bullish outlooks as investors have started to believe in the new uptrend phase.  This week’s price gap higher for the S&P 500 could provide a perfect support range to monitor in the coming weeks and months.

If the S&P 500 is able to hold 5750, and remain above the support range set from the gap earlier this month, then perhaps the equity markets will follow the same pattern as recent years and remain strong into August.

If, however, the S&P 500 is unable to hold this key support range, and we also confirm that breakdown with weaker momentum readings and deteriorating breadth conditions, then the S&P 500 may be charting a new course through what has become a strong period in the calendar year.

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

marketmisbehavior.com

https://www.youtube.com/c/MarketMisbehavior

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

If you didn’t check in on the stock market the last couple of weeks, you might be surprised to see how strong they were this week.

The three major stock indexes — S&P 500 ($SPX), Nasdaq Composite ($COMPQ), and Dow Jones Industrial Average ($INDU) — broke through their 200-day simple moving averages (SMAs) and are about 3–5% away from their all-time highs.

The Dow took a bit of a hit early this week, mostly because shares of UnitedHealth Group, Inc. (UNH) took a tumble. By Friday, though, the Dow recovered.

A Clearer Outlook Ahead

After dealing with an uncertain market, we’re finally seeing some encouraging signs. Large-cap growth stocks are trying to regain the lead, market breadth is improving (i.e. broader participation), and the Cboe Volatility Index ($VIX) has cooled off significantly.

Another helpful signal — the Bullish Percent Index (BPI) — is above 50% for the major indexes. This suggests that bulls are in control. In the 11 S&P sectors, there’s been a switcheroo. Consumer Staples and Utilities now have a BPI below 50%.

FIGURE 1: BULLISH PERCENT INDEXES FOR THE S&P SECTORS. Consumer Staples and Utilities are below 50%.

Want to dig into this yourself? You can view the full picture on the Market Summary page at StockCharts.com.

Image source: StockCharts.com. For educational purposes.

AI Stocks Back in the Spotlight

If you’ve been following the buzz around artificial intelligence (AI), you know it’s a hot area. This week proved that AI stocks still had their mojo. A mix of headlines, from new global investments in AI to easing tech regulations, gave these stocks a boost.

The VanEck Vectors Semiconductor ETF (SMH) jumped over 10% this week. And NVIDIA Corp. (NVDA), one of the biggest names in AI, surged 16% for the week. The stock is now trading above its 200-day SMA and approaching its February high, which could act as a resistance level. This is the first time NVDA’s stock price broke above its 200-day SMA after breaking below it on February 27.

Other big names like Broadcom Inc. (AVGO) and Taiwan Semiconductor Mfg. (TSM) also saw solid gains.

FIGURE 2. SEMICONDUCTORS MARKETCARPET. Note that NVDA, AVGO, and TSM saw strong gains this week.Image source: StockCharts.com. For educational purposes.

Investors Turning Toward “Offense”

Investors are rotating into offensive sectors such as Technology and Consumer Discretionary and moving away from traditionally “safe” areas like Utilities and Staples. This is an indication that investors are feeling more confident.

News of lower tariffs between the U.S. and China has eased fears, which is reflected in the performance of bellwether industries such as Home Builders, Transportation, and Retail. The SPDR S&P Retail ETF (XRT) took a big hit on the possibility of high tariffs but bounced in early April. This week, the ETF gapped up and is now trading above its 200-day SMA (see chart below).

FIGURE 3. DAILY CHART OF SPDR S&P RETAIL ETF (XRT). After getting hammered, XRT is showing signs of recovery. The stock is now gaining some traction. It’s trading above its 200-day SMA, and momentum is strengthening.Chart source: StockCharts.com. For educational purposes.

XRT’s relative strength index (RSI) is rising above 70 and the percentage price oscillator (PPO) is well above zero. Both indicators suggest a rise in momentum.

A Word of Caution: Consumers Are Still Nervous

Amidst the excitement, we can’t ignore one concerning signal: consumer sentiment.. The latest reading of the University of Michigan’s consumer sentiment index came in at 50.8, which is pretty close to the June 2022 reading of 50, when inflation was over 9%.

Results showed that consumers are worried about inflation — the expectation was a high 7.3%. Walmart (WMT) executives even mentioned during its recent earnings call that higher tariffs might lead to price increases. This is something to keep in the back of your mind because, when consumer sentiment weakens, it could ripple through the stock market.

Inflation expectations are starting to climb higher. The probability of the interest rate cuts has dropped, according to the CME FedWatch tool. Cuts in June and July are off the table now. The chart below is worth adding to one of your ChartLists.

FIGURE 4: INFLATION EXPECTATIONS ARE CREEPING HIGHER. It’s worth monitoring this chart because higher prices lead to less consumer spending and declining consumer confidence. This can be a headwind for equity markets.Chart source: StockCharts.com. For educational purposes.

The Bottom Line

When the stock market reverses course as quickly as it did this week, it doesn’t hurt to be skeptical. Before getting caught up in the euphoria, keep an eye on things like offensive vs defensive sector rotation, market breadth indicators, and key fundamentals such as inflation expectations. If inflation heats up again, the Fed will be reluctant to cut interest rates. This is the kind of thing that can put the brakes on a market rally.

End-of-Week Wrap-Up

• Dow Jones Industrial Average: 42,654 (+ 3.41%)
• S&P 500: 5,958.38 (+ 5.27%)
• Nasdaq Composite: 19,211 (+7.15%)
• $VIX: 17.24 (-21.28%)
• Best performing sector for the week: Technology
• Worst performing sector for the week: Health Care
• Top 5 Large Cap SCTR stocks: Palantir Technologies, Inc. (PLTR); Nebius Group NV (NBIS); NRG Energy, Inc. (NRG); Robinhood Markets Inc. (HOOD); Super Micro Computer, Inc. (SMCI)

On the Radar Next Week

• May PMI Flash
• April Existing Home Sales
• Earnings from Home Depot (HD), Lowe’s Companies (LOW), Toll Brothers, Inc. (TOL), XPeng Inc. (XPEV), Snowflake (SNOW), Baidu Inc. (BIDU), and several others.
• Fed speeches from Bostic, Jefferson, Williams, and others.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

SPY and QQQ crossed above their 200-day SMAs with big moves on Monday, and held above these long-term moving averages the entire week. The V-Reversal was extraordinary and SPY seems short-term overbought, but this cross above the 200 day SMA cross is a bullish signal for the most important market benchmark. Despite a bullish signal, long-term moving averages are trend-following indicators and it is important to set realistic expectations.

***** This is an abbreviated version of a research report covering the 200-day SMA, performance improvements and a twist for QQQ. Recent reports at TrendInvestorPro covered the V-Reversal, the Bottoming Process and an Exit Strategy for the Zweight Breadth Thrust. Click here to take a trial and get immediate access. *****

The chart below shows SPY with the 200-day SMA (blue). This 200-day cross captured two big uptrends since 2020 and foreshadowed the bear market in 2022. Even though these three signals look great, there were plenty of whipsaws along the way. SPY crossed the 200-day SMA 141 times since 2005, which averages 7 crosses per year. Averages can be deceptive because some years have more crosses than others. SPY did not cross its 200-day in 2021 and 2024, but there were 22 crosses between January 2022 and March 2023.

The indicator window shows Percent above MA (1,200,1) to better highlight these crosses. It turns positive (green) with a bullish cross and negative (red) with a bearish cross. The values are the percentage difference between the close and the 200-day SMA.  

There is no such thing as a perfect indicator. Trend-following indicators are great at catching big trends, but they are also prone to whipsaws (failed signals). Whipsaws are simply the price of admission for a trend-following strategy. We must take the good (big trends) with the bad (whipsaws). As the chart above confirms, trend-following works over time because one good trend pays for the whipsaws.

Chartists can improve 200-day SMA signals with a little smoothing. For example, use a 5-day SMA instead of the close. Since 2005, the 5-day SMA crossed its 200-day SMA 55 times, which averages out to 3 per year. Fewer signals means fewer whipsaws. Also note that this smoothing generated higher returns and lower drawdowns.

The chart above shows the SPY with Percent above MA (5,200,1). This indicator captures the percentage difference between the 5 and 200 day SMAs. Instead of 22 crosses between January 2022 and March 2023, the 5-day SMA crossed the 200-day SMA just 8 times. This indicator is part of the TIP Indicator Edge Plugin for StockCharts ACP.

We can reduce whipsaws even more by adding a signal filter. This next section will cover signal filters and performance metrics for SPY. We then show how other ETFs perform and add little twist to improve performance for QQQ signals. This section continues for subscribers to TrendInvestorPro. Click here to take a trial and get immediate access. 

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For those of you who are a bit more steeped in technical analysis, you’ve likely heard of Dow Theory. A set of principles developed from Charles Dow, a journalist/analyst who founded what’s now the Wall Street Journal back in the late 19th century, Dow’s insight was foundational to modern technical analysis.

Here’s a question: How can we view today’s market using Dow Theory’s six core tenets?

The market seems to be turning around, especially after the recent 90-day pause in U.S.-China tariffs. What insights might Dow Theory give us about the current reversal? Let’s dive in.

#1: The Market Discounts All Known Information

Here’s the thing: When tariffs are used as a nimble and adjustable strategy for hardball negotiations, how can anyone possibly price in the data? Too many unknowns are hiding behind the cards played for the market to discount any data driven by fundamentals and geopolitics.

So, this tenet can probably be skipped for now.

#2: The Market Has Three Movements

We’d have to modify this slightly, as markets, several of which are globally accessible 24/5 via futures and digital platforms, have significantly altered the market dynamics since Dow’s time.

Still, his notion of primary and secondary trends is as relevant today as it was then. But increased market access and trading volume have created tertiary or micro-trends on a scale above the Dow’s third movement of daily fluctuations.

Take a look at this 15-year monthly chart of the S&P 500 Large Cap Index ($SPX).

FIGURE 1. MONTHLY CHART OF THE S&P 500. The primary trend is up and is reversing from a deep secondary correction.

According to this tenet, one way to interpret this is that the primary trend is bullish and the corrections and bear markets, highlighted in yellow, are all secondary trends, as dramatic as they were on a smaller time scale.

Key insight: SPX’s primary trend is bullish, but the question is whether it has pulled out of its bearish secondary trend. It’s now trading above its 10-month simple moving average (SMA), which is roughly equivalent to a 200-day SMA, but whether it can hold is something to monitor.

#3: Primary Trends Have Three Phases

Is the broader market in an accumulation phase, where professional investors buy undervalued assets, a public participation phase, where retail investors are jumping in, or a distribution phase, where smart money sells to the euphoric retail crowd?

Take a look at this weekly chart.

FIGURE 2. WEEKLY CHART OF THE S&P 500. These indicators are based on surveys of retail and professional investor sentiment.

Two ways to gauge retail and professional sentiment and participation are by analyzing the American Association of Individual Investors (AAII) and National Association of Active Investment Managers (NAAIM) surveys (respectively). Look at the current week (blue dotted line) and note how the AAII Bull-Bear indicator representing retail sentiment is still net bearish while the NAAIM indicator shows accumulation as the S&P 500 gaps above the 40-day SMA (equivalent to its 200-day counterpart).

In the weeks leading up to the current week, as the NAAIM levels increased while the AAII remained net bearish, the contrast between the two arguably signals the strong likelihood that the broader market is in the accumulation phase. But remain cautious as, with the first tenet on known information, any new information or change in global trade policy can disrupt this picture, sending the $SPX back below the 40-week.

#4: The Averages Must Confirm Each Other

Back in his day, Charles Dow was referring to the Dow Jones Industrial Average ($INDU) and the Dow Jones Transportation Average ($TRAN). Today, most investors look at the $INDU alongside $SPX and the Nasdaq Composite ($COMPQ).

FIGURE 3. CHART OF THE BIG THREE U.S. MARKET INDICES. Visually, the charts look similar, but a closer look is warranted to see the differences in detail.

While the differences in price action are nuanced, a quick scan of all three on the StockCharts Market Summary page will tell you that all three indexes are more or less on even footing. But in the interest of saving space and not zooming in on each chart,at the time of writing, only the $SPX and $COMPQ are trading above their 200-day SMA; $INDU is just right below it.

Another way to measure this is by comparing market breadth, aka participation.

FIGURE 4. MARKET SUMMARY OF BREADTH AND BULLISH PERCENT INDEX. These indicators focus on market participation, something that price alone can’t show.

The window on the left tells you the percentage of stocks in each index trading above their 20-, 50-, 100-, and 200-day moving averages. Given the importance of the 200-day SMA, we’ll focus on that. While this window doesn’t show $INDU, you can see that over 54% of $SPX stocks and only 33% of $COMPQ stocks are trading above their 200-day SMA. However, the Nasdaq 100 Index ($NDX), a more tech-concentrated subgroup of $COMPQ, has the most bullish reading, with 64% of its stocks trading above this key level.

Switching over to the Bullish Percent Index (BPI) window on the right, the $SPX and $INDU have the strongest bullish participation with 74% and 83% of their stocks, respectively, signaling Point & Figure Buy Signals. The $COMPQ, at only 50%, is lagging the two (not the case with $NDX, however, which is also very bullish).

So, do the averages confirm each other? More or less, yes, with $COMPQ as the laggard. This may indicate a bullish turnaround in the secondary trend, but the secondary trend is also extremely vulnerable to sudden shifts in the geopolitical environment.

#5: Volume Confirms the Trend

Volume-based indicators that can help you gauge buying/selling pressure and accumulation and distribution.

FIGURE 5. CHART OF THE BIG THREE US MARKET INDEXES WITH VOLUME INDICATORS. Volume-based indicators like Chaikin Money Flow and Accumulation/Distribution Line give valuable insight into buying/selling pressure and accumulation/distribution.

The Chaikin Money Flow (CMF) is positive in all three indexes, indicating more buying pressure than selling pressure. While the CMF readings are not as strong as they were in January and February, you might expect the levels to rise if the overall market begins to turn. The Accumulation/Distribution Line (ADL) is also exhibiting a steady increase, more so in the $SPX and $COMPQ than in the $INDU, which appears to be flattening.

In summary, volume is confirming the turnaround, but tentatively and cautiously.

#6: A Trend Remains in Effect Until a Clear Reversal Occurs

This is where a close examination of the underlying secondary trend structure is critical. You may have different ways to gauge when a market is trending up or down, or not trending at all.

I usually begin (and sometimes end) by looking at the relationship between price and sequential swing highs and swing lows. For example, take a look at this daily chart of $INDU.

FIGURE 6. DAILY CHART OF THE DOW JONES INDUSTRIAL AVERAGE INDEX. The index has reversed to the upside, but it’s important to monitor these key levels to determine whether the current reversal will develop into an uptrend.

Note that I’m using the ZigZag line to market the key swing highs and lows on the chart.

$INDU’s downtrend reversed when it broke above 40,750, the two swing high points that marked a key resistance level. Now, $INDU is aiming to challenge the next swing highs (resistance levels), which are situated in the range between 42,500 and 43,000. For the reversal to develop into an uptrend, $INDU must stay above the most recent swing low of 37,750 and eventually break above 43,000.

In short, and according to Dow theory, the downtrend has been broken, but the uptrend has not yet been confirmed by the price action.

At the Close

Dow Theory may be over a century old, but its principles remain surprisingly resilient, especially when viewed through the lens of today’s volatile, information-saturated markets. Right now, we’re seeing a bullish reversal in the markets. However, this reversal is happening on the secondary trend level, which is extremely vulnerable to sudden and severe shifts in today’s volatile geopolitical environment. In short, the trend may be turning, but as Charles Dow himself might suggest, don’t call it an uptrend until it proves itself.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your personal and financial situation, or without consulting a financial professional.

Where are we in the market cycle? In this video, Julius reviews the sector rotation and asset class performance from the past 2-3 weeks to provide an objective take on where we stand in the current market cycle. Using his signature Relative Rotation Graphs (RRG), he uncovers shifts in momentum and leadership across sectors and asset classes.

This video was originally published on May 15, 2025. Click on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

Let’s be real. How many of you kicked yourselves for not jumping into some long positions last Friday?

Of course, hindsight is 20/20, and unless you’ve got a crystal ball, there’s no sure way to know what the market will do next. What you can do, though, is be ready for the next opportunity, and one stock that’s flashing signals is Super Micro Computer, Inc. (SMCI).

Super Micro Computer has had a rocky ride. The company was delisted from the Nasdaq in 2018, after there was a report of possible accounting issues by Hindenburg Research, and it risked being delisted from the Nasdaq again in February 2025. SMCI managed to get its act together, filed its 10-K, and clawed its way back into compliance. Now it’s back on the SCTR radar, and with a current reading of 99 — an impressive move. As such, the stock has made its way into the Top 10 StockCharts Technical Rank (SCTR) report in the Large Cap category. Will it muscle its way back into the top three like it did in early 2024?

SMCI Stock’s Journey

The three-year arithmetic scale weekly chart of SMCI below shows the stock price rising higher and making a steep vertical upward move in 2024. SMCI’s stock price hit a high of $122.90 on the week of March 4. From there, things weren’t great. The stock price faced headwinds, bringing the stock price to a low of $17.25 by mid-November 2024. SMCI’s stock price has been grinding higher, carving out a series of higher lows.

FIGURE 1. WEEKLY CHART OF SMCI STOCK. After hitting a high of $129.90 in early March 2024, the stock tanked to $17.25 by mid-November. It is starting to show signs of recovery, but how far will it go this time?Chart source: StockCharts.com. For educational purposes.

From a weekly perspective, SMCI looks like it’s regrouping, and this week’s spike might just be the shot of adrenaline it needs.

The Daily View: A More Granular Perspective

A partnership with Advanced Micro Devices (AMD), a Saudi Arabian data center deal, and a couple of analyst nods may have had something to do with SMCI’s stock price gap up on Wednesday. But let’s shift away from the headlines and talk technicals (see daily chart of SMCI below).

FIGURE 2. DAILY CHART OF SMCI STOCK. The stock gapped up on Wednesday. Will it continue higher, or will the gap get filled? Chart source: StockCharts.com. For educational purposes.

• SMCI has broken above its 200-day simple moving average (SMA) (even if it’s still sloping downward … a small detail not to be overlooked).
• The relative strength index (RSI) is getting close to its 70 line, indicating momentum is heating up.
• The percentage price oscillator (PPO) is crossing above its zero line.
• And again: SMCI’s SCTR score is at 99.1, a position of technical strength.

Is It Time to Get In Front of SMCI?

You know the drill. Timing a trade is about strategy. There’s always the temptation to hit the buy button, but rushing in can lead to expensive regrets. Ever place a limit order and end up canceling it because your nerves got the better of you? We’ve all been there.

Gaps like the one we saw in SMCI on Wednesday are tricky. They often get filled, but not always. So, in the case of SMCI, it may be worth waiting for the dust to settle. This is where patience becomes your superpower. 

An ideal scenario would be a pullback in price to perhaps the 200-day SMA, followed by a reversal. If the RSI breaks above 70 and the PPO rises above the zero line, it would confirm the necessary follow-through to push the price higher. Wait for the ideal setup before you make your move.

In other words: Don’t chase. Let the trade come to you.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The S&P 500 ($SPX) just staged one of the sharpest rebounds we’ve seen in years. After tumbling into deeply oversold territory earlier this year, the index has completely flipped the script—short-term, medium-term, and even long-term indicators are now pointing in a new direction.

One longer-term indicator that hit an extreme low in early April was the 14-week relative strength index (RSI), which dropped to 27. That’s among the lowest levels since the 2008 financial crisis.

The obvious takeaway: it was a great time to buy, even in cases where the low RSI didn’t mark the low. Everyone who pounded the table a few weeks ago has been proven right, even if the rebound was faster and stronger than most could’ve predicted. So, what happens next?

Don’t Expect a Straight Line Up

The long-term picture looks promising, but markets rarely move in a straight line. Even though the market was higher months and years after these deeply oversold readings, the path wasn’t a straight shot to new highs (even if long-term log charts sometimes make it look that way).

The chart below shows the lowest weekly RSI readings in the S&P 500 since 2008.

FIGURE 1. THE LOWEST WEEKLY RSI READING SIN THE S&P 500 SINCE 2008.

Almost every time, there was a pause, often more than one. Some were sharp, others more prolonged. The first real test typically came when RSI bounced back to the 50-zone (the mid-point of its range). Each of these moments is highlighted in yellow in the chart below.

FIGURE 2. AFTER DEEPLY OVERSOLD RSI READINGS, THERE WAS OFTEN A PAUSE IN THE INDEX.

As shown, this often marked the initial digestion phase after the face-ripping rally off the lows. Eventually, the SPX climbed back to a weekly overbought condition, but not right away. This pattern was clearest in 2011, 2015–16, and 2022. The depressed weekly RSI showed that things were getting washed out, but volatility persisted before a lasting uptrend took hold.

Indeed, the current snapback is one of the quickest and most powerful turnarounds in decades, but this pace is also unsustainable. A slowdown is inevitable.

So how does the market handle the next round of profit-taking? By continuing to make higher lows – and converting those into additional bullish patterns.

XLK Makes A Comeback

The market comeback has been led by large-cap growth; that much is clear. The Technology Select Sector SPDR ETF (XLK) has roared back nearly 30% in just six weeks. That’s a massive move in a short period, and far larger than any failed bear market rally seen in 2022. The best six-week rally back then came in the summer and topped out at 17%.

The last time we saw a six-week gain of 20%+ was the period following the COVID-19 low in spring 2020. As we know, that snapback continued, with XLK overtaking its pre-crash highs and ultimately rallying 160% into the early 2022 peak.

This isn’t a prediction, but we shouldn’t ignore it either. Why? Because before 2020, the last such move happened in April 2009, right after the ultimate low of the 2008 financial crisis.

FIGURE 3. WEEKLY CHART OF XLK.

Industrials are Building Strength Too

The Industrial Select Sector SPDR ETF (XLI) and XLK are the first sector ETFs to register overbought 14-day RSI readings. While that suggests a short-term pause could be near, it wouldn’t be a negative. As the weekly chart shows, a pullback could help complete a large bullish formation.

Once again, bouts of intense volatility eventually can lead to the biggest bullish chart formations. Let’s keep XLI on our radar screens.

FIGURE 4. WEEKLY CHART OF XLI.

Even Solar Stocks Are Waking Up

The Invesco Solar ETF (TAN), which has been stuck in a brutal downtrend for years, just rocketed higher by 40%, using intra-day highs and lows. That rally has produced the first overbought reading since late May 2024, which, notably, lasted only a day before momentum faded.

Yesterday, TAN tagged its 200-day moving average, prompting a round of profit-taking. This sets up a critical test for TAN, which has consistently failed at resistance or after short-term pops. Selling strength in TAN has been a highly effective strategy for quite some time.

FIGURE 5: DAILY CHART OF TAN.

The weekly chart clearly shows this pattern playing out since TAN topped in early 2021. Like anything else, TAN could eventually turn the corner—but to do so, it would need to form a legitimate higher low from here.

For now, the downtrend deserves respect. Chasing this move is not advised. Selling strength remains the recommended approach—until proven otherwise.

FIGURE 6. WEEKLY CHART OF TAN.

The Bottom Line

Yes, the market’s comeback has been fast and fierce. But fast moves don’t necessarily mean a straight path higher. Expect slowdowns and pullbacks, watch for bullish setups, and don’t chase runaway rallies. There’s opportunity out there, but it’s all about timing and discipline.

Want to know how to find strong stocks in a volatile market? In this video, Joe uses Relative Strength (RS), Fibonacci retracements, and technical analysis to spot top sectors and manage downside risk.

Follow along as Joe breaks down how to use the Relative Strength indicator to separate outperforming stocks from those failing at resistance. He highlights sectors showing strong or improving RS, discusses the Fibonacci retracement on QQQ, and explains what it means for downside risk.

Joe wraps up with detailed chart analysis on viewer-submitted symbol requests, including QTUM, HOOD, and more, to help you sharpen your trading decisions with expert insights.

The video premiered on May 14, 2025. Click this link to watch on Joe’s dedicated page.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

For months, investors have been on edge over U.S.-China tariff tensions, bracing for everything from fears of empty shelves to rising prices. But after this weekend’s trade talks, where both sides agreed to temporary tariff cuts (emphasis on temporary), stocks surged.

On Monday, the Dow Jones Industrial Average ($INDU) jumped 1,160 points, while the S&P 500 ($SPX) and Nasdaq Composite ($COMPQ) rallied 3.26% and 4.35%, respectively.

Monday’s rally sparked hopes that the worst may be over. Yet analysts remain split: some see signs of a bottom, while others warn this 90-day pause is just the start of a long, messy negotiation.

So here’s the critical question: If this is the bottom, which sector (or industry) leads the rebound, and is it worth investing in it right now? For investors, the answer could be the difference between riding the next bull wave or watching it pass by.

Nasdaq-100 Shows Strength, but Which Sector Leads?

Checking StockCharts’ Market Summary midday on Monday, the Breadth panel showed that the tech-heavy Nasdaq 100 ($NDX) had the most percentage of stocks (62%) trading above their 200-day simple moving average (SMA), indicating early strength and recovery (displayed in the Moving Averages tab).

FIGURE 1. MARKET SUMMARY – INDICES TRADING ABOVE 20 TO 200-DAY MOVING AVERAGES. The Nasdaq 100 is the most bullish index above the 200-day, warranting a closer examination.

About 51% of the Nasdaq 100 is made up of Information Technology stocks, while Consumer Discretionary and Communication Services together account for roughly 31% of the index.

Information Technology Dominates the Index

To get a clearer sense of market breadth, it’s useful to examine the sector-level Bullish Percent Index (BPI), which shows the percentage of stocks within each sector exhibiting technical strength.

FIGURE 2. MARKET SUMMARY SECTOR BULLISH PERCENT INDEX. While many sectors have bullish BPIs, the tech sector is leading.

While Communications and Discretionary are exhibiting technical strength, the Information Technology sector is leading the pack, with over 91% of stocks triggering Point & Figure buy signals.

Semiconductors: The Bellwether to Watch

While tech is also comprised of various industries, only one—semiconductors—is widely regarded as a “bellwether” industry. Shifting over to the US Industries panel, semiconductors displayed the highest StockCharts Technical Rank (SCTR).

FIGURE 3. BELLWETHER INDUSTRY SCTR SCORES. Among the bellwether industries listed, chipmakers are outpacing everything else.

While my threshold for bullish SCTR reading is 76, the semiconductor industry is the only bellwether industry that clears that bar.

But what might the performance of the Nasdaq 100, semiconductor, and broader market performance look like side by side? To answer this question, I plotted all three on a one-year PerfCharts view.

 FIGURE 4. PERFCHARTS OF SEMICONDUCTORS, NASDAQ 100, AND THE S&P 500. Here, semiconductors aren’t looking so hot, being the laggard of the bunch.

Using VanEck Vectors Semiconductor ETF (SMH) as the industry proxy, you can see that SMH was leading the Nasdaq 100 and S&P 500 last summer, but began lagging the two indexes starting in November. SMH was the hardest hit in the aftermath of the Trump tariffs, and, while it’s recovering, its performance is still trailing both indices.

This raises two key questions: First, is SMH’s upswing a true recovery or a temporary bounce? And second, is it worth investing in SMH in this stage of the cycle (in other words, does it present an opportunity to catch an uptrend early on)?

Weekly Chart Signals: Bear Market Drop or Recovery?

Let’s take a closer look at SMH, starting with a weekly chart.

FIGURE 5. WEEKLY CHART OF SMH. From a primary trend perspective, one that can last years, the uptrend is arguably intact, though facing challenges.

Here are the key points to look at:

• SMH is trading above the 40-week SMA (equivalent to a 200-day SMA) following a sharp price gap up. But can it hold above that level?
• SMH plunged 39.8% from its 2024 high of around $280 to the 2025 low of $170. This is a textbook bear market drop that raises the question: Is this latest surge just a bear market rally?
• On the other hand, a long-term Fibonacci Retracement measured from the 2022 low to the 2024 high found support at the 50% and 61.8% retracement levels. This kind of pullback is not only “normal”, but also supports the view that SMH’s bullish “primary trend” is still intact.
• However, the Chaikin Money Flow (CMF) is signaling weak buying pressure. For the rally to continue, there needs to be stronger accumulation, something the CMF has yet to confirm.

Daily Chart View: Support, Resistance, and Warning Signs

After looking at SMH from a broader scale, what might the price action reveal if we were to zoom in using a daily chart?

FIGURE 6. DAILY CHART OF SMH. Zooming in, SMH’s situation looks even less bullish.

This chart tells a tougher story: SMH looks ready to re-enter the months-long trading range it broke to the downside in March.

Should You Invest In SMH? Here’s What to Watch

To answer this question, here’s some points you might want to focus on:

For one, note how closely the stochastic oscillator cycles mirror SMH’s fluctuations. With a reading above 96, SMH may be due for a near-term pullback.

Should it pull back, SMH will need to remain above or bounce at the $210 support range (highlighted in blue) for the current, albeit small, uptrend to remain intact. Below that, it might bounce at the consecutive swing lows—$185 and $170—but such a deep pullback indicates weakness and raises the possibility that SMH may slip back into the trading range (highlighted in yellow) that dominated a lengthy five-month period.

On the upside, SMH needs to eventually clear that same range before challenging its all-time highs at the $281 level. If SMH manages to do so, it’s likely to unfold in a series of higher highs and higher lows, which will take some time to develop.

At the Close: A Bullish Setup or Bull Trap?

While SMH has begun to exhibit significant technical strength, warning signs remain. If you’re bullish on semiconductors, the next few weeks will be critical. Holding the $210 support zone is key for keeping the uptrend intact. A drop toward $185 or $170 would raise serious doubts about the sustainability of the current rally.

If SMH can clear its trading range and build a structure of higher highs and higher lows, it could be poised to challenge its all-time highs once again. Until then, stay cautious and keep a close eye on the technical levels discussed above.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your personal and financial situation, or without consulting a financial professional.