Cracks Below the Surface? 7 Reasons to Take Notice of Tuesday's Market
Tuesday's market action may have had some meaning. Here's why.
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What do I mean by this and how did I come to the conclusion?
There is a lot to unpack:
First, as chronicled in the late afternoon, the divergence between indices grew more obvious/extreme on Tuesday:
* SPY -0.49%
* QQQ +0.00%
* IWM -1.99% (memo to Tom Lee I am still waiting for the Russell to rally and to begin crowing!)
* RSP -1.39% (equal weighted S&P, which I have been shorting in recent days)
Second, the brief gap higher in the premarket was "newsy" — generated by the news that Nvidia NVDA "is hopeful" that it will be able to resume H20 AI chip sales to China "soon" and by non-eventful bank earnings reports, which as I noted during the previous day may have discounted the likely results (with the strong share price performance leading up to them).
The S&P index failed to break out on the NVDA news:
As I wrote and expected in my column (below) and in the chart above — at 8 AM, stock prices quickly faded and closed at the day's lows, indicating, for now, demand for stocks may have been sated:
A Look Into Today's Possible Trading Action
My guess is that we get more or less in line bank industry results (and some profit taking in the stocks, which I sold down yesterday) as well as a consensus inflation print.
If so, I would also guess that (NVDA) will be treated as a one off and not serve as a tailwind for the average stock.
So, I wouldn't be surprised if the average equity (and the equal weighted S&P) shows little progress during the trading session.
Currently the S&P futures are +27 and I would attach a high possibility that this could be the day's high - but I have been wrong before!
Stay tuned.
By Doug Kass Jul 15, 2025 8:00 AM EDT
If S&P futures breach 6260 to the downside, we might have a failed breakout and bullish trap pattern:
Third, market breadth stunk up the joint. Indeed there has never been a day with such good investment returns and such lousy breadth:
Looks like close to an engulfing bearish candle on the S&P index:
And, the Russell Wasn't Crowing — just look at the closing puke of the IWM chart:
Fourth, speculative assets dropped (e.g. bitcoin -3%). Importantly, high yield is starting to roll over:
By contrast, the U.S. dollar may be turning higher (negative for equities which have tended to move inversely to our currency):
Fifth, if you watch the "shows" over the last 48 hours, any discussion of a possible overvalued market was dismissed (out of hand). Hubris and complacency was shining through every appearance. There was never a mention of how 23x P/E multiple is a poor launching pad for another leg in the market's advance.
Sixth, as noted by both The Stock Almanac's Jeff Hirsch and Ned Davis Research, we are entering a seasonally weak period:
Seventh, global interest rates continued to rise on Tuesday:
This commentary was orginally posted in Doug's Daily Diary on TheStreet Pro.
At the time of publication, Kass was long SPY puts (VS), QQQ puts (VS); Short SPY common (M) and calls (S), QQQ common (M) and calls (S).
