May 11, 2025
Weekly Market Outlook
By Geoff Bysshe
It’s time for the forward-looking active investor to focus on these technical market levels, tariff proof stocks, interest rate indicators, seasonal patterns, AND Bitcoin!
Here’s why…
Last week’s news flow, market price action, and FOMC meeting set the stage for a continuation of the bull market and an opportunity for the tariff tantrum to be in the market’s rearview mirror.
The tariff policy isn’t going away, but forward-looking active investors now have several valuable catalysts to focus on to anticipate the next opportunity and market direction. Not the least of which is a market in a bearish trend that has rallied significantly and stopped dead at one of the most widely watched technical resistance levels – the 200-day moving average, as shown in the chart below.
It’s time for a post-shock game plan.
As one would expect, Trump has started to declare victory with statements and posts on Truth Social like, “Many things discussed, much agreed to. A total reset negotiated in a friendly, but constructive, manner,” regarding the meetings with Chinese negotiators on Saturday.
The de-escalation of tariff threats is critical, but it is already priced in.
As we’ve proposed in the last two weeks of Market Outlook, the tariff policy shock likely created the bottom of a market correction that will now rebound on the back of more than just the de-escalation of tariff threats.
Recession or Rebound
The broadest catalyst that will drive the market significantly higher or back to new lows will be the prospect of a recession vs. an economic rebound.
Last week, economist Ed Yardeni cut his recession probability from 45% to 35% based on both recent economic data and the de-escalation of tariff policies. As he has for years, Ed has accurately anticipated economic and market trends throughout this chaotic year.
Following up with market-based bets on the likelihood of recession in 2025 that we shared last week, you can see from the chart below, Polymarket’s odds of recession also dropped last week by 10% (from 57% to 52%).
Considering that last week was a busy earnings reporting week and had an FOMC meeting, the direction of last week’s move in this chart is what is important, rather than the level of 52%.
Earnings Season Has Spoken
90% of S&P 500 companies have reported and the results have been better than many had feared.
Factset reports the following highlights about the current earnings season.
The chart below shows a breakdown of Q1 EPS reports vs. estimates by sectors.
Of course, these reported earnings represent pre-tariff shock data, but the guidance does not. The fact that 75 companies have issued guidance is in line with the average number that normally do so.
Last Wednesday’s FOMC press conference
After the prior week’s strong employment report and last week’s muted inflation data, the market wasn’t expecting a rate cut from Wednesday’s FOMC meeting, but there was a chance the press conference could move markets.
Chair Powell, however, delivered a message that was very clear in stating his intention to hold rates steady until there is a clear reason to react to slower growth or higher inflation. Either or both of these could result from the administration's current tariff policies.
While consumer sentiment inflation data is discouraging, there is evidence that suggests that inflation is less of a concern as shown by the various measures charted below.
The net result of last week’s news on the market’s expectations for fed funds rates was negligible. The table below shows that the market expects 75 basis points in cuts over the next six meetings, which is the same as the prior week.
Traders Are Less Likely to Remain As Patient As The Fed
Last week we displayed a chart of the SPY with the same horizontal lines around the 200-day moving average as shown below.
The basic analysis of the technical condition would suggest that the downward sloping 50-day MA (blue) is still bearish. So is the fact that the current price is under the 200-day MA (green).
Additionally, it’s easy to consider the roughly 15% rally from the low to be overbought, and likely to sell off.
Finally, the 200-day MA is so widely followed that any pullback below the black horizontal line could easily gain momentum as traders anticipate the market pattern of “failing at the 200”. Hence, the red arrow under the black horizontal line at $550.
The bullish picture, however, is equally compelling if the SPY trades over the red horizontal line, which is over the 200-day MA.
The indicators below the price chart, Real Motion and Triple Play Volume Trend, are bullish, and they become much more so if the 200-day is taken out on the upside.
It’s easy to assume that such a big retracement will rollover, but history doesn’t agree.
According to research by Bespoke shown below, 10 percent rallies that follow 10 percent declines tend to move lower in the following week, but higher over 1, 3, 6, and 12-month periods.
AAII Investors Were Bearish At Market Highs, But Now…
As you can see in the chart below, in mid-February, (when the SPY was at all-time highs), the AAII Investor Sentiment reading indicated that investors were very bearish. They were right.
Over the last two weeks, bullish readings and the spread between bullish and bearish investors have increased to their most bullish readings since February.
Previously bearish and neutral investors have turned bullish. The sentiment is still bearish, but the rally from the lows has seen bullish sentiment improve rather than wane. This could be early signs of markets seeing the tariff shock in the rearview mirror.
Look Out For These Moves In May
There’s nothing wrong with “sell in May” if you apply it at the right time, and you’re focused on a bigger time frame. There are ways, however, to be a little more precise with tools like calendar ranges and seasonal patterns like the chart below.
As you can see below, the seasonal pattern of May over the last 10 years (orange line) has been one that rallies in the second half of the month. This would suggest that if the market breaks higher next week, don’t fight it.
The idea of not fighting an uptrend in May is further supported by the chart below, which shows the seasonal pattern of the months of May that closed higher and those that closed lower.
Contrary to what you might think, it is not a given that a month that closes higher also trends higher for the whole month like the pattern you see in the chart below. May, however, is a month that supports the calendar range strategy that follows the early trend of the month because it has a tendency to trend!
More specifically, you’ll notice that “up” months tend to strengthen after the 9th trading day (which will be the 13th this year), but seasonals aren’t that precise, so get ready now.
If you look at the seasonality by sectors in the Seasonality area of our Big View service you’ll find the chart of the tech sector ETF (XLK) which shows it has been very strong in May. In fact, seasonally, it is one of the strongest sectors.
Why Bitcoin Matters (Even If You Don’t Own It)
Liberation Day’s big winner was Bitcoin.
There are three big reasons to focus on Bitcoin right now.
The tariff wars enabled Bitcoin to demonstrate its ability to serve as digital gold and act as like a risk-off asset.
As you can see from the chart below which displays several assets, indexes and ETFs since Liberation Day, Bitcoin (IBIT) has dramatically outperformed all other assets by a factor of 4x of greater!
One reason Bitcoin was likely to take on such a flight to safety roll, is due to the widespread adoption by both retail and institutional investors. The adoption level has accelerated in 2025, as you can see by the in flows chart below.
Finally, there is an interesting relationship demonstrated by the chart below, which not only supports why Bitcoin might continue its current rally, but also lends quantitative credibility to how it may at times serve as a hedge against inflation. Money supply growth is often cited as a source of future inflationary pressure.
A Tariff Pause For China
As this article is about to be released, news of a pause of the tariffs on China has pushed the SPY and QQQ over their 200-day and the lines outlined above.
The simple confirmation we’ll look for is a close or two over these levels, and or a continuation over the day’s highs that close over the average.
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 Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts.
The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. The video analysis dives deeper. |
Summary: Markets took a pause around their major moving averages as they digest the longer-term impact of the tariff policies. Market internals continued to improve from the volatile April price action, though losing some momentum from its strong bounce off the lows.
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**There isn't a market analysis video this week.
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