It has been a choppy 2025 in the equity markets and so far there is nothing really new to discuss when it comes to the economy. Inflation is still a bit too high and now the Fed will wait for a few months to see if they screwed up by lowering rates last year. Earnings season for Q4 is in the 8th inning and next week’s highlight will be a report from Nvidia – the semiconductor designer that creates computer chips that are the lynchpin for everything AI (their customers can’t get enough).
The S&P 500
For now, everything seems like a waiting game and that is certainly reflected in the chart below of the S&P 500 futures chart. As you can see, the stock market has been gyrating for months with several sharp drops and rebounds.
The most significant part of this chart is the resistance zone I have at the top of the chart. When the S&P has entered this area, sellers come out and we saw this again on Friday after a constructive week of trading.
The coming weeks have positive seasonality so if there is a catalyst to push through the top of this zone (6179) this should create a breakout and bring in more buyers. You can also see in the lower right hand corner that the RSI is now in an oversold condition; if you scan to the left you will observe that rebounds soon follow when this condition occurs. We should know early next week if this recovery pattern will ensue.
Checking In On 10Yr Treasury Yields
Yields have been declining these past few weeks but it is likely a modest pullback from an uptrend in yields that will last for some time. In general, yields moving higher signals growth in the economy. However, in this environment that message becomes clouded with the potential for inflation to re-ignite, quantitative tightening and the lagged effect of large fiscal deficits.
One thing you can count on, if you wait long enough the market will eventually reveal its true intentions. Soon, this choppy environment will end and the next chapter will begin.
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Paul J McCarthy III
President, Kisco Capital
