Will More Crazy Tariffs Stop The Most Hated Market Rally?

The stock market experienced a mixed close last week, with major indices seeing slight declines after Thursday's rally, while defensive sectors and gold gained. Investors are now focused on Tuesday's CPI report, with consensus expecting a 2.6% annual increase, which will significantly impact the 60% probability of a September Fed rate cut. Despite new tariff threats and some short-term technical indecision, underlying market breadth indicators and historical precedents following strong S&P 500 rallies suggest continued bullish momentum, though a modest pullback could be catalyzed by the CPI data or tariff developments.

Analysis

The U.S. stock market registered a mixed performance last week, characterized by profit-taking that pared earlier gains. The S&P 500 fell 0.3% and the Nasdaq 100 declined 0.4% for the week despite the S&P 500 reaching a new record high on Thursday. In contrast, defensive assets performed well, with the Dow Jones Utility Average up 1% and SPDR Gold Shares (GLD) gaining 0.7%, highlighting a degree of investor caution amid new tariff threats. The market's immediate focus is on the upcoming CPI report, with consensus estimates at 2.6% annually, a slight increase from May's 2.4%. This figure is a pivotal determinant for Federal Reserve policy, as a lower-than-expected reading would increase the current 60% odds of a September rate cut. Despite short-term technical indicators like doji formations in SPY and QQQ suggesting indecision, the underlying market health appears robust. The advance/decline lines for both the S&P 500 and Nasdaq 100 turned positive in late April and have since confirmed the new highs in their respective indices. This positive market breadth, combined with powerful historical signals like the April 25th Zweig Breath Thrust—which historically precedes an average six-month S&P 500 return of 14.8%—suggests that while a minor pullback is possible, the broader bullish trend remains intact.

Key Decisions for Investors

• Monitor Tuesday's CPI report closely, as a significant deviation from the 2.6% consensus will directly impact the probability of a September rate cut and likely introduce market volatility.
• For tactical positioning, watch the SPY's weekly doji low at $617.87; a close below this level would trigger a technical sell signal for a potential short-term pullback toward the 20-week EMA support near $589.05.
• Given the strength in underlying market breadth indicators and powerful historical precedents like the Zweig Breath Thrust, long-term investors should consider any near-term, catalyst-driven pullback of 2-3% as a potential buying opportunity rather than a signal of a major top.
• The outperformance of gold (GLD up 27.7% YTD) and utilities suggests that maintaining or adding positions in defensive assets could provide a valuable hedge against potential volatility stemming from tariff news or an unfavorable inflation print.