Stock market forecast in the week of 10 August = Trend
- Average directional index: Trend
- Institutional activity: Trend
- On balance volume: Trend
ANALYSIS
The outlook of the stock market continues to show a layout for US shares.
The S&P500 ($ Spx) Rose 2.4%. The index is ~ 3% above the 50-day advancing average and ~ 8% above the 200-day advancing average.
The ADX Directional indicator again joins the institutional activity and the volume on balance in Bullish Territorium. Distribution days ticked on the way to August; Something to keep an eye on.
SPX price and volume card before 10 August 2025
Performance comparisons
Consumer discretionary ($ XLU) LED sectors higher, while energy and health care ($ Xle & $ XLV) underperformed. Discretionary, staples and financial data ($ Xly, $ XLP, $ XLF) returned to bullish bias; Materials ($ XLB) returned to neutral and energy ($ XLE) fell on bearish.
S&P sector performance from week 32 of 2025
All sector styles won last week; Mega hood growth ($ Practice) led the load and high beta ($ SHBB) raised the back. Laggards last weeks ($ SPLV, $ IWN, $ IJJ, $ IWX, $ SPHD) All regained bullish bias.
Sector style performance from week 32 of 2025
In a reversal of the oil last week ($ Use) Inundated other assets and bitcoin ($ 4) Outprested. Oil also fell back to Beerarish bias.
Acti -class performance of week 32 2025
COMMENTARY
The earning season ends and a majority of companies (> 80%) beat their Q2 income estimates. Most estimates were lowered pending rates, which were largely delayed until earlier month, so that that performance is slightly less impressive than it appears for the first time. The full impact of new rates is probably in the profit data of Q4. However, the profit growth of the year after the year in quarterly income is still positive, which is good.
ISM Services PMI dropped to 50.1 in July, from June of 50.8 in June and under predictions of 51.5. Within that data, the Services Prices Index rose to 69.9, the highest since October 2022. For reference, this Subindex measures the prices that service companies pay for input (eg materials and services), and is an important indicator of inflatorous pressure in the Services sector.
This week we get the latest CPI and PPI inflation data, together with retail sales and consumer sentiment.
Elsewhere, President Trump signed an executive order to expand the access of Americans to alternative investments in their 401 (K) pension plans (cryptocurrency, private equity and real estate). Although a lot of ink has been spilled on the impact on the financial markets, keep in mind that this is the federal government we are talking about, so changes can take years.
Firstly, the SEC, US Treasury and Department of Labor must rewrite the regulations that define what is eligible as a permitted 401 (K) assets. Then 401K providers must offer new investment options within those rules. And then employers add those options to their 401K plans.
Despite the bouncing through different sectors and styles, August is a seasonal weak period for US shares, and another reason why we raised some caution flags last week. Since 1990 this period has the highest change in volatility and the second worst monthly return. The worst monthly returns? September. So don’t be surprised if the prices keep chopping. Take an extra time to view your stop levels, maximum loss amounts and profit goals for new and/or existing positions.
The best for your week!
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Sources: Bloomberg, CNBC, Federal Reserve Bank or St. Louis, Hedgeye, Stockcharts.com, Tradingconics.com, US Bureau or Economic Analysis, US Bureau or Labor Statistics, Tradingconics.com
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