Hello everyone, this week we'll discuss the US stock market trends that everyone is most concerned about. After hitting a low of 4800 points in April, the US stock market has been soaring, completing a beautiful V-shaped reversal and regaining the high ground of 6000 points. Last week, the US stock market slightly fell back after touching 6060 points, and from a weekly perspective, it seems to have encountered some resistance. So, what will happen to the US stock market next?
Personally, I don't think this rebound is over yet! Although the S&P 500 index saw a 1.13% correction last Friday due to geopolitical factors, I don't think this will have a significant impact on the market. After all, this is completely different from the level of tariffs imposed by the US on the world back then. Of course, if the situation escalates, that's another story. But as of now, I believe these geopolitical events will only affect small-scale fluctuations and will not change the medium-to-long-term trend of the US stock market.
US Stock Market Trends from a Long-Term Perspective
From a longer time frame, what kind of trend is the US stock market following? In fact, the US stock market has been accelerating along a weekly 15-times cycle.
Previously, the US stock market touched the GMMA support line of the weekly 15-times cycle three times:
- First time: December 19, 2022
- Second time: March 13, 2023
- Third time: October 23, 2023
So, my view is that the S&P 500 index is still in an accelerating upward channel. Don't be too anxious. On the contrary, I believe that the S&P 500 index will at least break the high of 6147 points created on February 10, 2025 in the upcoming offensive. There is no need to worry too much before breaking the historical high.
Short-Term Analysis: Is the 120-Minute Retracement an Opportunity?
From a short-term perspective, the S&P 500 index has risen from 4835 points to 6059 points, achieving a gain of 1200 points. This wave of rise has been advancing along the 120-minute trend.
Previously, the S&P 500 index had two retracements at the 120-minute level:
- First time: May 23
- Second time: May 30
I believe that this current retracement is just the third retracement at the 120-minute level. As early as last Thursday's show, I clearly stated that if the S&P 500 index retraces to the support level between 6000 and 5900 points, I think it is still an opportunity to add to long positions.
Why do I say that? Because the S&P 500 index previously fluctuated and bottomed out between 5950 and 5750 points, forming a W-bottom. According to the theory of the W-bottom, if the neckline is successfully broken, then it must rise at least to the height of a W-bottom. In other words, I think the S&P 500 index is very likely to rise to the previous historical high of around 6200 points at least.
In last week's retracement, the US stock market fell to a low of 5963 points, which is basically near the support level of the previous W-bottom neckline. Therefore, I still believe that last week's retracement of the S&P 500 index is not only a clear signal of 120-minute GMMA support, but also a key support point in the previous fluctuation range. Therefore, I personally believe that the S&P 500 index is likely to have another opportunity to break upward.
In addition, from 5843 points (the second foot of the W-bottom) to 6059 points, this 200-point increase, I don't think the strength is very large. In short, I think the retracement of the US stock market last week has actually reached a very strong support level. The downside space is limited, and the probability of a strong rebound in the short term is very high.
Signals Released by the VIX Volatility Index
Next, let's take a look at the VIX volatility index, which is closely related to the S&P 500 index. Has it also reached an important resistance level? The volatility index rushed to a high of $53 in April and then quickly fell to $19.3. Overall, the volatility index also experienced a V-shaped decline along with the V-shaped reversal of the S&P 500 index.
Currently, the volatility index is running downward along the 240-minute trend. As you can see, the volatility index is basically retracing to the GMMA pressure level of the 240-minute level for the second time. Last Friday's retracement of the S&P 500 index also drove the volatility index to rebound to a certain extent.
In general, I think the volatility index is still under the pressure of the 180-minute GMMA. Moreover, last Friday's high of $23.74 for the volatility index is also near the high of $23.89 from the Friday before last.
In other words, I think the volatility index is currently at a short-term pressure point, which is also the previously verified 240-minute GMMA pressure level. This means that the probability of the volatility index continuing to rise and the S&P 500 index continuing to fall is not high. On the contrary, I think the probability of the volatility index continuing to fall is higher. Therefore, everyone doesn't need to worry too much about the US stock market turning downward. I think the US stock market is likely to continue to rise.
Next Week's Highlight: The Fed's FOMC Meeting is Coming!
There is another very important thing next week, that is, the Federal Reserve will hold another FOMC meeting next Wednesday, at which time the latest interest rate decision will be announced, and the future interest rate cut expectations will be projected. This is crucial for the US stock market.
We can also take this opportunity to look at the recent situation of 30-year Treasury yields and the US dollar.
From a daily perspective, the 30-year Treasury yield has recently seen a slight decline. Especially with the decline in CPI data, inflation expectations have decreased, which naturally means that the Fed's rate cut expectations are rising. If the Fed's rate cut expectations heat up, judging from the recent 30-year Treasury yield, it has fallen from the previous high of around 5.18% to around 4.8%, a drop of 5%.
I have a very clear analysis of the 30-year Treasury yield. I think it was previously falling along a monthly 2.2-times cycle. Now, after experiencing a rapid decline, the 30-year Treasury yield has reached the GMMA pressure point of the 4-times cycle of the previous 2.2-times cycle.
You can see that the 30-year Treasury yield fell from 1984 to 2020, for about 36 years, or even 40 years. Such a long period of decline, of course, means that the Fed has been in a long-term interest rate cut cycle.
Although in the past 5 years, the 30-year Treasury yield has soared from 0.8% to over 5%, with a huge increase. But I think, from a larger trend, it is still in a very clear downward trend. If interest rates are in a clear downward trend, then the probability of interest rates continuing to fall is of course very high. This may still be good news for the US stock market.
Short-to-Medium Term Trend of 30-Year Treasury Yields
From a shorter time frame, what is the state of the 30-year Treasury yield? From the medium-term cycle of the daily level, the 30-year Treasury yield is near 5.2%. After touching a high of 5.18% in October 2023, it is very likely to form a mid-line M-top at this position.
So, don't consider going long on interest rates at this position. Because from a 40-year long cycle, interest rates are in a downward trend; from a medium cycle, the probability of interest rates forming a medium-term top pattern near 5.18% is very high.
Of course, from a short-term perspective, we must also be wary of it not forming an M-top near 5.18%, but forming a W-bottom. But I think the probability of it forming a W-bottom later is very low. So, at this position now, and recently, interest rates have fallen back from 5.15% to around 4.8% again. I think the probability of it continuing to fall is still very high. Lower interest rates naturally mean that it may be a positive for the US stock market.
The US Dollar Index's "M-Top" Hint
In addition to interest rates, I think the US dollar index has also recently formed a very clear medium-to-long-term M-top.
The US dollar index has been fluctuating in the range of $115 to $99 for three years from 2022 to 2025. Now, the key point of $99 has been broken last month. After the break, for the US dollar, it is basically the establishment of a three-year M-top.
If the US dollar has established a three-year M-top, then the US dollar is very likely to enter an accelerated decline range next. The US dollar entering an accelerated decline range is of course a positive for the US stock market.
This is because if the US dollar depreciates, even if the market value of US stocks remains unchanged, US stocks denominated in US dollars will rise. So, I think from the perspective of the US dollar, the probability of the Fed cutting interest rates sharply next is relatively high. Therefore, don't be too aggressive in going long on the US dollar at this position. On the contrary, I think the probability of the US stock market rebounding next, or continuing to rise, is very high.
In short, I think after a slight fluctuation in the US stock market last week, the S&P 500 index has reached the support of the 120-minute GMMA and retraced to the support level near the previous W-bottom neckline. From the current point of view, I think the probability of the US stock market continuing to launch a breakthrough next is relatively high, and everyone does not need to worry too much. From the perspective of interest rates, I think the interest rates of US stocks will still be in a long-cycle downward trend next, and the US dollar is also in a long-cycle top pattern. From this perspective, I think the probability of the FOMC meeting being beneficial to US stocks next is still relatively high.