July ends with another victory for the bulls: the S&P 500 closes higher for a third consecutive month, reaching a new all-time high at 6,427. But the triumph feels tainted by nerves.
On Friday's pre-market, the S&P 500 has already pulled back to 6,285, and the Nasdaq 100 to 22,980. This isn't just profit-taking after a rally — it's the market attempting to digest a fresh wave of external shocks and local signals.
Traders are focused on:
- monetary policy expectations,
- the upcoming jobs report (nonfarm payrolls),
- corporate earnings from major companies, and
- of course, trade wars.
The stock market remains hostage to signals from the White House: President Trump is launching new tariffs against key trade partners starting August 7. While it's not a panic yet, more and more investors are moving to cash or reducing their exposure to risk assets.
Among market leaders: Microsoft surprised with strong quarterly earnings, pushing its market cap close to $4 trillion during the session, making it the second company after Nvidia to reach that milestone. This gives Big Tech another chance to lead, but the imbalance in the indices, driven by just a handful of IT giants, is becoming more obvious.
Nvidia's stock, by contrast, fell 0.78% as investors began trimming positions in overheated names, rotating into new opportunities.
The market is clearly reacting to mixed corporate news: Amazon plunged 7% on weak guidance, while Apple rose 2% on strong earnings. The indices are struggling to digest these conflicting signals and are beginning to show clear signs of fatigue.
Profit-taking is now evident. The rise in PCE by 0.3% MoM and 2.8% YoY dims hopes for a near-term Fed rate cut. All eyes now turn to the upcoming nonfarm payrolls, which could set the tone for the entire month of August.
The global risk lies not only in macro and monetary policy but also in geopolitics. The US tariff escalation may provoke retaliation and increase market volatility in August. Furthermore, the familiar post-Fed pattern of "shorting the market" played out again: the local pullback in the indices delivered quick profits to the most nervous traders.
Technical picture: bulls are holding the Highs, but risks of a pullback are growing
The S&P 500 has recently been setting new highs with little resistance, reaching the 6,380–6,460 zone. However, it's important to note that the recent close came in below the highs, and Friday futures are retreating — a first warning sign for those still holding long positions.
A breakout above 6,400 was achieved, but holding above that level has failed. Local support now lies around 6,300. A break below this level could open the way to more significant support at 6,177 and 6,061 — both key reversal zones in recent months.
The second line of defense is the 6,177–6,061 range, where bulls held ground in June and July. If the index consolidates below 6,300–6,280, a sharper drop is likely — especially in the event of a weak jobs report or intensified trade tensions.
The RSI on the daily chart is starting to cool from overbought levels, but we are still far from a full correction. The market structure hasn't turned downward yet, but indicator divergences are growing, and participation in the rally is increasingly limited to just 5–7 mega-cap stocks.
The Nasdaq 100 is even more sensitive to news. Amazon's poor report and overall cooling of AI hype have given sellers more power. The index is now testing short-term support at 22,900–22,850. A break here opens the path to 22,500 and below.
There's still no formal trend reversal, but traders are widely locking in profits on winning positions. It's a classic moment where weak macro data or even a lack of new drivers could trigger a chain reaction of sell-offs.
At this stage, large opening gaps and sharp pre-market moves are particularly dangerous — clear signs of a transition to a seller's market.
Outlook for next week: expect volatility and the start of a correction
The week after the nonfarm payrolls release is traditionally a turning point — the market either finds a new driver and continues the rally or takes it as an excuse to lock in gains and correct.
Under current conditions, the second scenario looks increasingly likely.
If the NFPs report disappoints (especially on wage growth or total job creation), the correction could accelerate.
For the S&P 500, the next downside target would be 6,175–6,200, then 6,060–6,080, with a possible short-term drop to 6,000–6,050 if volatility spikes.
If the nonfarms are strong and there's no worsening of trade tensions, the indices may attempt to retest their highs. But this scenario seems less likely now, given the overbought conditions and narrow market breadth.
The market has become overly reliant on 5–7 mega-cap names, which means even modest corrections in those stocks could drag the indices down 2–4% without a clear catalyst.
Analysts expect volatility and choppy movements next week. Markets will seek a balance between Big Tech euphoria and emerging geopolitical risks. Watch for action in mid-cap sectors and capital rotation into more defensive plays like healthcare, telecoms, and possibly dividend stocks.
For traders
It's time to de-leverage, take profits, and hunt for high-quality entry points in green zones post-correction. Speed is key to survival in this kind of environment. August starts at full throttle — and the market is setting the stage for a new game.
