From Nasdaq: 2025-02-18 08:58:35

Last week saw headlines on tariffs, Powell’s testimony, inflation data, and the release of the CPI and PPI reports. Yields on the 10-year Treasury note spiked in response to hotter-than-expected CPI data but ultimately closed the week at a similar level. The S&P 500 closed higher, testing key support levels and nullifying a potential bearish pattern.

Hedge funds bought US equities at the fastest pace since November, according to Goldman Sachs. The SPX and QQQ entered the week at prior highs, with corporate buyback activity potentially driving new all-time highs. Equity option buyers on SPX component stocks remain supportive, with a low put/call volume ratio suggesting potential for a breakout.

The SPX surged nearly 6% from mid-January to an all-time closing high last week. Short interest data showed a 3% decrease from mid-January to the end of January, indicating potential short covering driving the sharp rally. Short interest on SPX component stocks is now rolling over from multi-year highs, posing a risk for bears.

The potential for sustained short covering poses a risk for bears, despite the SPX facing chart resistance. Short interest on SPX component stocks is rolling over from multi-year highs, hinting at a possible short-covering breakout. Todd Salamone is Schaeffer’s Senior V.P. of Research.



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