Is Mid August the Turn? Mark Newton's Charts
Audio Brief
Show transcript
In this conversation, Mark Newton, Head of Technical Strategy at Fundstrat, analyzes the recent S&P 500 breakout, evaluates broad market breadth, and provides a framework for navigating sector rotation.
There are three key takeaways. First, monitoring critical S&P 500 support levels helps manage downside risk. Second, tracking broad-market breadth is essential to confirm the health of the overall trend. Third, watching lagging technology sub-sectors provides early signals for the sustainability of the tech rally.
Regarding S&P 500 support, key levels to watch include 7500 as the first sign of weakness. A weekly close below this level indicates a potential failed breakout, while a drop below 7300 signals a deeper correction of up to seven percent toward the major uptrend line.
Broad market breadth, specifically the Russell 3000 advance-decline line, confirms major index breakouts when it hits new highs. As long as this metric remains near peak levels, any near-term market pullbacks should be interpreted as minor consolidations rather than a major trend reversal.
For the technology sector, sustainability depends on broad participation rather than just a few mega-caps. Analysts should monitor the ratio of equal-weighted technology to the broader market, as well as the DRAM hardware sector, to confirm a healthy, sector-wide expansion.
Ultimately, combining disciplined trend-following with objective breadth indicators allows investors to navigate volatile markets and identify high-probability entry points.
Episode Overview
- This episode features Mark Newton, CMT, Head of Technical Strategy at Fundstrat, delivering the monthly technical strategy webinar on August 6, 2026.
- The discussion centers on analyzing the recent breakout in the S&P 500 and other major indices, evaluating the strength of market breadth, and navigating the intense sector rotation currently defining the market.
- It provides viewers with a clear framework for identifying key support levels, understanding the health of the technology sector, and anticipating potential market corrections.
- This content is highly relevant for traders and investors looking to apply technical analysis, trend-following methodologies, and market indicators to their portfolio management.
Key Concepts
- Trend-Following in Choppy Markets: Sticking with a trend-following methodology requires high discipline during volatile, "whippy" periods. Technical analysts must remain flexible enough to recognize when a trend has shifted or when a previous bias was incorrect, quickly adjusting their course rather than clinging to outdated assumptions.
- Market Breadth Expansion: A healthy market breakout is confirmed when multiple indices (S&P 500, Dow Jones, equal-weighted S&P, Russell 2000/3000) move together, supported by an expanding advance-decline line. Seeing the Russell 3000 advance-decline line hit new all-time highs—exceeding its late 2021 peak—signals that broad participation is driving the market upward, which is technically very constructive.
- Equal-Weighted Tech vs. Cap-Weighted Tech: While mega-cap tech stocks often dominate headlines, analyzing equal-weighted technology (RSPT) relative to the broader market (RSP) reveals whether the tech sector's recovery is broad-based. A breakout in equal-weighted tech suggests a healthier, more sustainable sector-wide rally compared to one driven solely by a handful of massive stocks.
- Defensive vs. Risk-On Rotation: Monitoring the relative strength between defensive sectors (consumer staples, utilities) and risk-on sectors (discretionary) helps gauge overall market sentiment. A sharp turn upward in discretionary relative to staples suggests strong underlying risk appetite, even during minor index-level consolidations.
Quotes
- At 1:05 - "The art of obviously technical analysis involves not just sticking with trends, but knowing immediately when you're wrong and trying to change course." - Explaining the critical importance of risk management and adaptability over dogmatic adherence to a market bias.
- At 5:05 - "Russell 3000 advance decline hitting new highs is not something that we can simply discard and saying that... this is a very important thing when it happened." - Emphasizing that broad market participation is a highly reliable indicator of a structurally sound upward trend.
- At 12:47 - "Those are my downside targets if and when we break last week's lows, which I don't sense is going to happen right away." - Illustrating how a technical analyst establishes clear, predefined support levels and downside targets to manage risk before a correction occurs.
Takeaways
- Monitor key S&P 500 support levels to manage risk: Watch the 7500 level closely as the first sign of weakness; a weekly close below this level indicates the recent breakout may have failed, while a drop below 7300 would signal a deeper correction of 5% to 7% toward the major uptrend line.
- Track the Russell 3000 Advance-Decline Line for trend health: Use this broad breadth metric to confirm major index breakouts; as long as the advance-decline line remains near or at new highs, any near-term market pullbacks should be viewed as minor consolidations rather than the start of a major bear market.
- Look for confirmation in lagging tech sub-sectors before going all-in: While major software and semiconductor names show strength, wait for the DRAM/broader technology ratio (DRAM/RSP) to bottom out and turn upward as a key signal that the memory and hardware space is ready to fully support the tech sector's next leg up.
