InterMarket Analysis Update for Monday February 24, 2025

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Overview
This weekly analysis looks beyond the S&P 500 to other markets, sectors, indices, and assets, comparing them to the S&P to uncover broader trends. It assesses S&P 500 valuation using historical and forward-looking earnings and provides an in-depth breakdown of growth versus value dynamics, where growth outperforming value signals a positive market, and value outperforming growth indicates negativity.
S&P 500 Valuation
Valuation concerns emerged last week, notably on Friday, February 21st, despite the S&P being above the historical P/E threshold of 20 (currently ~22) since 2022. The Shiller P/E, averaging 10-year earnings, sits at 37.9%, well above the mean/median of 16-17 and the +1 standard deviation mark, marking it as overvalued—yet this hasn’t deterred the market historically. Forward-looking P/E ratios show the Mega Cap 8 at 28.7 (down from the 30s), S&P 500 at 21.8, mid-caps at 15.6, and small caps at 15.3, suggesting small and mid-caps are fairly priced, while large caps remain expensive. A discrepancy in small-cap P/E (15.3 vs. 25 in another source) favors the lower figure from Edward Yardeni’s data. Despite overvaluation, the market has sustained gains, indicating fundamentals inform but don’t dictate technical trading decisions.
Growth vs. Value
Growth stocks fell 3.55% on Friday but remain in a long-term uptrend, while value, down less, is testing its 50-day moving average but is also in an uptrend. Ratios confirm growth is still outperforming value long-term, though recent weakness (e.g., Friday’s pullback) is notable. ETFs and indices like the Mid-Cap and S&P growth-to-value ratios show uptrends but are slipping below 50-day moving averages, hinting at softening strength. Small-Caps, however, are faltering, testing their 200-day moving averages (S&P 600, Russell 2000), with a potential bounce or breakdown looming. No major shift to value dominance has occurred, unlike 2022, but the trend should be watched.
Intermarket Insights
Commodities & Inflation: The CRB Index (commodities) is in an uptrend, raising inflation fears, though inflation vs. deflation ratios remain below a declining moving average, suggesting no long-term shift yet. Oil is down (low 70s), but natural gas (4.27), diesel, corn, wheat, and fertilizer are rising, while copper lags (downtrend daily, uptrend weekly).
Bonds & Yields: The 10-year yield fell below 4.5%, boosting bond prices (uptrend forming), potentially supporting stocks, though Friday ignored this. Junk bonds continue to outperform treasuries, signaling a risk appetite, while Japanese yields rise (weekly concern).
Currencies: The dollar is in a long-term uptrend but weakening short-term; The Euro, Yen, and Briths Pound are in downtrends vs. the dollar but rebounding recently.
Indices & Ratios: The NASDAQ 100 and Mega Caps are outperforming the S&P, though pulling back; Small Caps are underperforming sharply. Stocks vs. commodities shows weakness (nearing a death cross), and U.S. stocks lag world stocks slightly.
Sectors: Tech and discretionary (growth) weakened Friday but hold uptrends; staples, utilities, and healthcare (defensive) gained, though staples trail S&P long-term. Materials and energy are underperforming.
Other Assets: Gold and silver hit highs, outperforming the dollar and oil; Bitcoin struggles below $100K; emerging markets and Europe are showing strength.
Positive vs. Negative Trends
Positive (50-day above 200-day MA): Growth, value, dollar, CRB, gold, silver, mega caps, FANG, ARKK, low volatility, staples, Dow composite, bonds, tech, high-leverage loans, NYSE, Wilshire, NASDAQ, Mid-Caps, Small-Caps, Micro-Caps, All Stocks, Emerging Markets, Bitcoin.
Negative (50-day Below 200-day MA): Copper, Euro, Yen, British Pound (vs. dollar), SOX index, World Bonds.
Conclusion
The S&P 500 remains overvalued but resilient, with growth still leading value despite Friday’s hit. Inflation pressures from commodities and Small-Cap weakness are concerns, offset by falling yields and broad market stability. No major trend reversal is evident, but the coming week (February 24th-28th) will test Small-Cap support and Growth’s resilience amid mixed intermarket signals.
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DISCLAIMER This video is for entertainment purposes only. I am not a financial adviser, and you should do your own research and go through your own thought process before investing in a position. Trading is risky!