The U.S. stock market ended last week with a notable rebound, bulls recovered the weekly central level as major indices, the , , and , all closed with gains.
The Dow rose 0.8%, the S&P 500 gained 0.5%, and the climbed 0.3%, recovering from a three-day downturn. This positive momentum was largely driven by the release of the August Personal Consumption Expenditures () price index, the Federal Reserve’s preferred inflation gauge. The report showed that rose 2.9% year-over-year, which was in line with expectations.
This news, while indicating persistent , solidified investor confidence that the Fed’s course toward a potential cut in October remains intact.
Company-specific news also provided key catalysts. Electronic Arts (EA) shares surged by 15% following a report that the company is nearing a deal to be taken private, potentially in a $50 billion leveraged buyout. Similarly, Boeing (BA) stock saw a significant gain of nearly 4% as the Federal Aviation Administration (FAA) eased safety oversight, a move that could accelerate aircraft production and delivery.
On the other hand, new tariffs announced by the administration created a mixed performance across different sectors. We saw domestic manufacturer Paccar (PCAR) benefit from a tariff on heavy trucks, while import-reliant furniture retailers like Wayfair (W) and RH (RH) faced stock pressure.
The proposed 100% tariff on imported branded drugs had a limited negative effect on major U.S. pharmaceutical stocks, as many have already announced plans for building domestic manufacturing facilities, which provides an exemption (some of them are building them already).
Last week’s economic landscape was not without its complexities. The University of Michigan’s for September fell to 55.1, below the forecasted 55.4, suggesting that consumers are expressing lower optimism about the economic outlook. This drop in confidence, however, did not overshadow the market’s positive reaction to the inflation data, underscoring that for now, investors are prioritizing the macroeconomic picture over consumer-level sentiment.
As we look ahead to this week, it is essential to remain attentive to several potential market-moving factors. The new tariffs are set to take effect on October 1, and their initial impact on supply chains and consumer pricing will be closely watched. Additionally, the ongoing risk of a U.S. government shutdown could introduce significant market uncertainty. I recommend monitoring these developments, as they will be critical in shaping the market’s direction in the immediate term.
TECHNICAL CONDITIONS:
: Monday is very likely to bring green price action; in any case, let’s zoom out to analyze the weekly chart for the SPY:
The weekly candle set a cross, which, as highlighted, is a warning sign; during the last two years, it has anticipated pullbacks or corrections to the market.
The red arrow indicates an immediate -9% correction at the beginning of 2023, the orange one that follows anticipated a -3% pullback, and the yellow one in March 2024 was an early sign of a -6% pullback. Similar cases follow for May 2024 with a mild -3% intra-week pullback (hence the orange instead of a red arrow), and the yellow one for the end of June 202,4, anticipating a -6% decline.
What is the case today? An immediate correction like the red arrow indicates? An intra-week pullback like the orange arrows present? Or an early warning followed by two green weeks before a deeper pullback around -6%?
The weekly central level will help us navigate the current conditions. We have studied before that choppy weeks are usually part of top formations.
When the rate of change presents a divergence with price action, the warning signals have more relevance. The oscillator does not top with the price action like the RSI; this one provides a quiet condition that, when a decline unfolds, it usually occurs quickly.
DOW JONES:
Dow Jones is currently shown in the chart below. The Rate of Change (ROC) has been diverging from the price for a couple of weeks, which is perfectly normal after a parabolic rally and has also preceded pullbacks a couple of weeks later.
The Dow Jones reached the annual target that had been on my charts since April/May ($46,336). At the time, this seemed extreme, but after only five months, the target has been reached. These annual levels can bring turbulence, as premium subscribers observed during three weeks in August and the beginning of September, when $6,486 was reached for the S&P 500 and $23,654 for the Nasdaq 100.
Today, the “godfather of the indices” printed indecision at the “pending to reach” annual level, suggesting caution for the days ahead. As usual, the key support and resistance levels are included at the left of each of my charts. For next week, the price must recover and stay above $46,249 to consider any temporary bullish continuation. $46,421 could set significant resistance, as it is a monthly level.
If the index continues below the central level, the minimum destination is $45,783, which still looks likely given other factors like volatility and stock participation.
Two weeks ago, I studied the current stage of the bull market using specific patterns that have proven to be a successful approach to navigating the medium term. This methodology worked when I anticipated a visit to $4,800 for the S&P 500 in January (the low was $4,835) and when I forecasted $6,486 in April/May during a time of market panic. The context is bullish, and what I’m looking forward to is a healthy pullback.
: Tech was due for a pullback, and a -2.5% drop occurred during the week from top to bottom. The bearish target for the week at $588.5, which was shared with subscribers last week, worked with remarkable precision as support. While the bounce on Friday looks promising for bullish continuation on Monday, the weekly price action ended up forming a candle that anticipates at least an intra-week lower low. The 20DMA, currently at $585, is very likely to be visited next week.
2 GIANTS IN DIFFERENT STAGES:
: The recent breakout is validated by high volume. A consolidation at the current price would be a normal and healthy development, just as it was after the previous two jumps. Additionally, and most importantly for the long term, a “U-turn” has been completed on the chart. The context is Bullish for the end of the year and beginning of 2026.
: Clean series of lower highs during the week, printing a weekly shooting star that anticipates weaknesses in price action ahead. The 50DMA has been breached every week during the las three. The price is also on the edge of the volume shelf, any minor fall would open the space to fall in a volume gap. Key level for next week: 178.6