A common phrase investors have likely heard over the last few years is, “breadth is bad, it might be bearish for equities,” only for the cap-weighted S&P 500 to continue to march higher. Well, get ready to hear it again. Breadth is coming out of the market as we mentioned in one of yesterday’s articles, “Bullish Percent Moves Lower.”  However, other than a reversal into Os on the S&P 500’s (SPX) default chart, the technical picture still looks quite strong. Looking at a different benchmark, the S&P 500 Equal Weight Index (SPXEWI) has shown signs of weakness over the last few weeks. After being unable to break through its prior high at 7600, SPXEWI reversed down into Os and then gave its first sell signal since April at 7300. SPXEWI did reverse back into a column of Xs this week but this does set up the potential for a second consecutive sell signal at 7250. While there is nothing to be extremely alarmed about yet, it’s clear that the average stock in the S&P 500 has had some wind taken out of its sails after a strong run since the April low.

One of our short-term indicators, the Ten Week for the S&P 500 (^TWSPX), is giving the same signal as the price action on SPXEWI that the average stock in the S&P 500 is starting to slow down. After bouncing around 60% to 80% from most of May until the end of July, TWSPX is now charting at 50%, which shows that only half of all stocks within the S&P 500 are trading above their respective ten-week (50-day) moving average. This action itself is not a major concern yet, but in conjunction with the weakening price action on SPXEWI it’s giving investors a yellow light over the next few weeks at least. Any stocks that have already shown signs of breaking down to weak attribute status or that are trading in heavily overbought territory following a strong multi-month performance should be investigated as trimming opportunities at this point. While we haven’t seen evidence that the long-term trend is changing for large cap domestic equities, now is not the time to be overly aggressive with the short-term picture looking less than ideal. For those that implement covered call strategies, this would be a good time to write calls on existing positions.

Rate cuts may soon be on the horizon. Last week’s poor jobs report spurred markets on the idea that the economy might not be as resilient as hoped… seeing numbers come in below expectations. Somewhat significant downward revisions of months prior built on this idea. With that said, estimates of a rate cut during next month’s Fed meeting jumped notably, sitting at roughly 93% at the time of this writing on 8/6. Markets are also pricing in a handful of additional rate cuts before the end of the year.

Rate cuts can be largely dependent on messaging and overall language around why said cut occurred. On one hand, cheaper capital is a tailwind for markets as high growth firms can fund projects at a lower rate. On the other, there is typically a reason that rate cuts typically occur… because overall economic growth is stalling out. Again, investor reception to cuts can be largely dependent on the broader state of the economy, but for now it appears as if possible rate cuts in 2025 is more a sign that the fed is confident that inflation is under control, giving them the flexibility to take monetary action as needed. This could certainly change as the year continues. 

Finance 101 taught us that as rates go down, outstanding fixed income goes up. This relationship is somewhat easy to digest, but your clients will certainly be interested in how else their portfolio is positioned in the event of rate cuts later on in the year. From a sector perspective, rate-sensitive sectors like real estate are the main benefactors when rates fall. Higher growth areas like technology can also benefit as innovative projects are easier to finance through debt issuance. The table below details performance following rate cuts since 1995. Utilities, Communication Services & Financials are points of weakness… at least when it comes to averages.

Lower rates are also a tailwind for some more defensive minded groups, mainly dividend payers and precious metals. This makes sense… imagine you own a hypothetical low-volatility asset paying you 4% a year in dividends. This 4% is going to be comparatively more lucrative when a riskless US government bond is paying you less, not more. The same is true for precious metals which pay you no dividends as they sit under your mattress.

Wherever you are looking, potential rate cuts present a golden opportunity to check in with your clients to discuss how they are positioned as we move through the third quarter of the year. Many of you will have a watchlist (portfolio) of your clients’ holdings loaded into the NDW system. (For those that don’t, check out how to create one here) From there, you can use the evaluate tool (pictured below) to highlight some valuable insights across the watchlist, including TA score distribution, sector distribution and more. From there, identifying weak/replaceable names is easy. Simply trim/cut exposure to low attribute stocks and funds within your portfolio in favor of stronger available options.

The platform also has easy access to replacement idea generation. The buy lists provide high relative strength names across various sectors and asset classes. For those of you looking for other ways to source replacement options, you can utilize the “other ideas” tab for any stock on its respective PnF chart which provides actionable names within a similar sector as the name searched. For those of you looking for something more “analyst curated” you could use the Daily Equity Roster as a starting point (updated daily by the research team) or utilize one of the premade screens via the security screener. For instance, the “Technically Actionable Dividend Payers” screen below reveals a list of 16 high attribute stocks that have a dividend yield >3%. Remember, dividend payments when rates are lower are comparatively more significant, so adding tactical exposure to those areas for more defensive minded clients can be helpful.

Each week the analysts at NDW review and comment on all major asset classes in the global markets. Shown below is the summary or snapshot of the primary technical indicators we follow for multiple areas. Should there be changes mid-week we will certainly bring these to your attention via the report.

Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email james.west@nasdaq.com.

Data represented in the table below is through 8/5/2025:

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