7-1-25: A Fresh All-Time High for the Record Books

by Ivan Martchev

July 1, 2025

There is nothing like the conclusion of a fierce Middle Eastern aerial battle and the end of the second quarter reporting period to turbocharge the stock market.

Quite a few portfolio managers who got shaken out in early April are now chasing the tape.

In the opening week of the second quarter, the S&P 500 lost 12% in just four trading days, capping a 20% loss from the late February all-time high. Then it completely recovered all these losses and registered a fresh all-time high last Friday! This type of action is one for the record books. I have seen it before – in a December 2018 low to a 2019 all-time high – but this surge developed much faster than the one in 2019.

Obviously, we won’t keep appreciating at the same rate, but under a best-case scenario I would not be surprised to see the S&P 500 reach 7,000 by year’s end – if there are no major wars, no out-of-control oil price spikes and external events don’t erupt – mostly of a geopolitical nature, impossible to predict ahead of time. As some economists like to say, ceteris paribus (“all else being equal”), in a good economy the stock market tends to appreciate. From everything I have seen, the Trump administration plans to focus on more economic-friendly measures after the current trade talks are wrapped up, and that is bullish.

A case in point is that President Trump’s aggressive tweet about Canada on Friday caused another trillion-dollar swing in the stock market but it could not keep stocks down long, as fund managers bought stocks fiercely in Friday’s final last hour. Canada seems to want to launch an EU-style digital tax (retroactively!), and the Trump administration would not have any of that. That tax was conceived by the former Trudeau administration, but it was unfortunately carried out by the new Conservatives. The difference now is that President Trump gave them a week to come to their senses, announcing on Friday that it would take that long to figure out the right tariff rate on Canada. I bet that in the next seven days Canada will do a lot to avoid those tariffs, as Canada is far more dependent on U.S. trade than the U.S. depends on Canada.

See the various trade balance below, with Canada’s large (76.5%) dependence on exporting to the U.S. vs. America’s smaller 17.5% export share to Canada. The import differential is also wide, 49.2% vs. 13.7%.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Even though the S&P 500 index is overbought again, based on a tried and true indicator like RSI (on the top of chart) as I have noted previously, this can be misleading: “Overbought” Can Be a Nebulous Concept. Overbought does not mean the market will head straight down, even with a small correction – as from mid-June to mid-July in 2024, we spent most of the time trading with an RSI above 70. This lasted four weeks, more or less (the red arrows on the chart), or longer if you take the start of the swing higher in the very beginning of June 2024. This type of action did ultimately lead to a very sharp shakeout in mid-July of 2024 but it illustrates that the market can stay overbought for quite a while before it corrects.

The last time we reached these overbought levels we had a 200-point S&P 500 pullback to the middle Bollinger band (dotted line), which is basically a 20-day moving average. To illustrate these and other technical indicators, here is an updated chart of the S&P 500 Index with some technical indicators.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The S&P 500 index right now is “walking the bands,” when it comes to the Bollinger Bands indicator. This basically means it is trading two standard deviations away from a 20-day moving average along the upper Bollinger band. I asked the chatbot Grok to define what “walking the bands” means for Bollinger bands – just to see how far its marbles reached into obscure trading lingo, and the bot did not disappoint:

“Walking the bands refers to a situation in technical analysis where a financial instrument’s price moves closely along the upper or lower Bollinger Band for an extended period, indicating a strong trend. Bollinger Bands are a volatility indicator consisting of a moving average (typically 20-day) and two standard deviation lines (upper and lower bands) plotted above and below it.

“When the price ‘walks’ the upper band, it suggests strong bullish momentum, as the price consistently stays near the upper boundary of the bands. Conversely, walking the lower band indicates strong bearish momentum. This behavior often occurs during trending markets, but traders watch for potential reversals when the price deviates too far from the moving average or when volatility contracts, as it may signal the trend is weakening.

“Key points:

Upper band-walk: Price hugs the upper Bollinger Band, showing strong upward momentum.

Lower band walk: Price follows the lower Bollinger Band, indicating strong downward momentum.

Caution: Prolonged walking can precede reversals if momentum fades or the bands contract.

To recap, the market is indeed overbought, but, as we saw last year it can get even more overbought. The market can correct at any time, but any corrections during this fierce rally (so far) have been capped by a 20-day moving average (the middle Bollinger band), which basically says this is a very strong rally.

In other words, I think this rally has more room to run – with any normal corrections notwithstanding.

Traders often use other indicators (e.g., RSI, volume) to confirm the trend’s strength or potential exhaustion when observing this pattern.” – From the chatbot “Grok”