The continuous new highs in the US stock market hide concerns! Weakening upward momentum may indicate that the rally is peaking

According to the Zhitong Finance APP, the U.S. stock market is currently near historical highs, as the market generally believes that the U.S. economy remains strong under Trump's tariff policies, and inflation remains moderate. However, beneath the surface of the U.S. stock market continuously hitting historical highs this month, there are already signs that this rally is losing momentum. The S&P 500 index has not seen a single-day fluctuation of 1% for 17 consecutive trading days, marking the longest period of relative calm since last December. Matt Maley, chief market strategist at investment firm Miller Tabak, believes that this reduction in volatility indicates that market momentum is weakening after a strong rebound following the low caused by tariffs in April. Other signs also indicate that momentum is waning. Dan Greenhaus, chief market strategist at Solus Alternative Asset Management, pointed out that the proportion of S&P 500 constituents above their 20-day or 50-day moving averages has recently declined, suggesting that this rally may be losing steam. Matt Maley stated that against the backdrop of continuous news about the Federal Reserve Chair position and President Trump's trade war, investors seem to be growing weary of waiting for more stocks to join the tech-led rally in the U.S. stock market. He said, "Whenever a narrow rally starts to lose momentum, it usually means that investors begin to look for broader signs of an uptrend. When they do not see these signs, they often temporarily withdraw from the market." The current cautious attitude of investors is understandable, as a new earnings season has just begun, trade negotiations are still evolving, and the market generally expects that the Federal Reserve may take a few more months to consider interest rate cuts. Aaron Nordvik, head of macro equity strategy at UBS Securities, believes that the tailwinds driving the stock market higher are weakening, such as the historical trend of strong stock performance in July. He stated, "I have always been very optimistic about the market, but now most of the good news has already been reflected in stock prices." Although Aaron Nordvik believes that the stock market will not experience a sharp decline, he pointed out that the risk-reward ratio of the stock market is not as attractive as it was a few weeks ago. However, market volatility may intensify this week. Two of the "seven giants" that have supported the rise of U.S. stocks in recent years—Tesla (TSLA.US) and Google's parent company Alphabet (GOOGL.US)—will release their earnings reports this week. The market is once again highly focused on these companies' spending plans, especially their investments in artificial intelligence. Next is the Federal Reserve's interest rate decision on July 30. The market generally expects the Fed to keep interest rates unchanged, but all eyes will be on Fed Chair Jerome Powell to see if he will respond to Trump's ongoing pressure for rate cuts or address media reports about his potential dismissal by the president It is worth noting that the reduction in market volatility can also be seen as a reason for the stock market to continue rising—the so-called "fear index" is currently not far from its low point for the year. Dan Greenhaus stated, "Given that the currently released inflation and economic data are better than expected, coupled with the fact that corporate earnings comments have been quite good so far, I'm not sure if we should rely too much on technical analysis at this time." Dave Lutz, a stock sales trader and macro strategist at Jonestrading, also pointed out, "There's an old saying on Wall Street, 'Never short a quiet market.' History shows that calm markets tend to rise slowly." For investors waiting for new catalysts to re-enter the market, the earnings season has yet to provide decisive signals. Overall, U.S. corporate performance has been robust, but the market's reaction has been relatively muted, which is concerning and may indicate that most of the good news has already been priced into this historically high market with elevated valuations. Although recent economic data supports a bullish stance on the stock market, strategists at Citigroup also indicated that these positive factors have largely already been reflected in stock prices. Scott Chronert, Citigroup's head of U.S. equity strategy, wrote in a report last Friday, "The issue is the current market environment setup. It feels like the market has already risen before the good news has truly landed."