00:00 Speaker A
The S&P 500 is entering the second half of the year after notching several all-time highs. But some technical indicators show that the rally could be under pressure as stocks into overbought territory. So, what does this mean? Well, take a look here at the relative strength index, the RSI, which shows that stocks are at their most overbought since July of 2024 here. And so one of the things that we can take into consideration with some of these overbought levels are the trades that continue to be crowded into as well. And one of the most popular long trades continues to be long mag 7. However, in the conversations that we've had over the course of this week, what is key, even at these all-time high levels, is to look for more breadth in this market. If we did see more broadening out into the other 493 S&P 500 names, oh yeah, and all of the other areas of the market that have not gotten the same type of fanfare as those annex to the AI trade, that's what analysts and investors are going to be looking for over the rest of the course of this summer, where we were already anticipating some volatility, some chop on lower volume. And then additionally, you have the additive of some of the major events, two of which kicking off July. One, the tax bill. And then two, of course, the post liberation day and now liberation day 2.0, where we're expecting even more of the talk around trade negotiations. Now, a downside risk to the market, of course, right now is if we don't see any of these trade deals come forward, where the White House had already talked about looking for multiple deals to come over the finish line and good faith negotiations that were moving forward. From the EU, it sounds like they're willing to accept some of the tariffs that the US and the counterparts and trade representatives are putting forward, but the larger consideration there is if we see more pushback and more tough talk on trade, how that could potentially rattle markets, especially if you continue to hear some of the rhetoric targeted towards Asia-Pacific countries that have the larger outsized GDP footprint. Think China, think Japan. And so that's where we're going to be continuing to track how stocks are in moving in reaction to some of those headlines here, especially if we do have weaker than expected volume that could catapult or leg up, leg down some of the activity, especially as we've just recently got back to these all-time high levels that were unseen since February of this year. But some of the strength that we're seeing also may be tested going into this earnings season where hopefully we'll get a little bit more clarity on outlooks. This coming after a quarter where tariffs were the most repeated word over the course of the S&P 500's earnings reports.
