Much like in May, we saw the market hit a peak right at the midpoint of the month and then drift lower for a bit. But this time, it looks like the US Large Cap indexes are trying to continue their move higher. Seasonality also suggests that July tends to be a positive month for the market. But…
…what could make any available information about the market invalid is what happens around July 9th when the 90-day tariff pause comes to an end. We know that last time it wasn’t pretty, at least for a few days. The markets did quickly recover from the “tariff tantrum.” But will we need to go through another one of those wild periods? It’s really hard to say at this point.
The unrest around Iran only affected the US markets for what felt like minutes, and then it went on as if nothing happened. We were watching the VIX (Volatility / Fear Index), and it never spiked like it would if there was trouble ahead. How odd, right?!
The Federal Reserve also had a meeting where nothing really happened and the markets didn’t seem to care. No changes in rates for now and it doesn’t seem likely that we’ll see any change until possibly September. However, comparing the current Fed Funds rate (see my previous articles or follow Tom McClellan on X.com) to the 2-year Treasury Yield, it appears that the Fed should cut rates by up to 0.75% (possibly three rate cuts). So it looks like, again, they are behind where they need to be. But they claim everything is fine for now. Yep, we’ve heard that before.
This month’s chart is a look at the NYSE New Lows, removing the new highs, as they are usually compared or netted out. I got this concept from Bonnie Gortler and have made it part of my daily chart review. What I get out of it is an understanding of how broad selling in a downward-moving market might be. My version of this chart is inverted, so when the market goes down, the line moves down with it.
Key levels tend to be when the new lows on the exchange grow from 50 to over 100. A direction change is revealed when the line starts to move upward again after a significant selloff, much like we saw in April this year. In late April, when the market tried to re-test the 5000 level on the S&P 500, it failed to do so. This new lows chart concurred with that outcome, suggesting that it wasn’t so bad that time.
NYSE New Lows above the S&P 500 Index (Source: StockCharts.com)
Our Shadowridge Long-Term Trend indicator remains positive since April 24th and while it peaked on May 16th, it’s continued to grind higher with the market. It has been moving slower than it was off the dramatic April lows, but still consistently suggesting money continues to flow into the stock market.
Our Mid-Term Cycle indicator is currently negative and has been back and forth a couple of times this month. But while it is negative, it’s not so weak to cause concern just yet.
As of Wednesday night (June 25th, 2025), our Shadowridge Dashboard showed Positive to Negative market sectors as 5 to 6. So the market is very mixed about its future direction and that does appear to agree with the uncertainty we could see in early July. If the negative sector list grows, then we’ll be ready to get more defensive.
Right now, 9 RGB Bond Indexes are trending positive above their 50-day Moving Averages. The only weak bond sector at the moment is the High Yield Muni index, which has struggled with direction over the past several months.
RGB Economic and Interest Rate Sensitive Bond sectors (Source: ShadowridgeData.com)
The Aggregate Bond market and some US Treasuries have begun to return to some sort of normalcy in the past few months. Their correlations are still high compared to the US Equity markets, so they still don’t do much to diversify away risk. But these may be worth watching and leaning into, should rates start falling more rapidly. For now we still like, and lean into, the more Economic side of the bond market like Floating Rate and High Yield for these same reasons.
Bottom Line: July is historically a good month for the market, even while being in the middle of the weakest 6-month period (the “sell-in-May” to Halloween period), but there are a few factors that could interrupt the good times we’re seeing again. For now, in our models, we’re largely invested rather than sitting on the sidelines. But we’ll watch the sectors for signs of weakness sneaking in before the market goes down more seriously.
Stay safe out there!
1 The Standard and Poor’s 500 is an unmanaged, capitalization-weighted benchmark that tracks broad-based changes in the U.S. stock market. This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility, and 40 financial companies representing major U.S. industry sectors. The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.
2 Charts are for informational purposes only and are not intended to be a projection or prediction of current or future performance of any specific product. All financial products have an element of risk and may experience loss. Past performance is not indicative of future results.