Markets Surge. A Look Ahead Shows Pullbacks May Be on the Horizon

The floor of the New York Stock Exchange on Wednesday. (Spencer Platt/Getty Images)

With earnings season in full swing, Microsoft and Meta Platforms delivered standout results Thursday, helping to solidify the Nasdaq Composite’s robust 11% year-to-date gain.

Yet despite the strength, cracks may be forming beneath the surface. A look at the daily chart over the past year reveals a cluster of ominous signals, specifically, six doji candles since June 30. These indecisive sessions often indicate waning momentum or an imminent shift in trend.

With most of the market-moving earnings reports now behind us and no clear catalysts on the horizon, some near-term fatigue wouldn’t be surprising. A pullback to the key 20,000 level, site of both a failed bull flag breakout and a successful cup-with-handle base, could be in play as we head into August, historically one of the market’s more volatile months.

The Nasdaq Composite index was trading around 21349 Thursday.

On the S&P 500 ’s weekly chart, the doji candle that appeared three weeks ago, highlighted in the rectangle, remains a subtle but important concern. While strong markets can often shrug off such signals and power higher, which the index has done, this week’s formation of a spinning top candle suggests renewed indecision. Though it has a slightly larger body than a doji, it still reflects hesitation among buyers and sellers.

When these types of patterns emerge in succession, they deserve attention. Adding to the stakes, Apple and Amazon, both top-five index constituents, report earnings Thursday evening. Notably, the S&P 500 is essentially flat on the week, despite massive gains from Microsoft and Meta Platforms. That alone speaks volumes. In this context, a tactical pullback of 3–4% in the near term seems increasingly plausible.

The S&P 500 index was trading around 6402 Thursday.

The Dow Jones Industrial Average continues to lag its broader peers in 2025.

While the Nasdaq Composite has gained 11% and the S&P 500 is up 9%, the Dow has advanced a more modest 4%, a reflection of investors’ preference for growth-oriented names that dominate the other benchmarks.

Technically, the chart paints a troubling picture. A clear triple top has formed around the round 45,000 level, dating back to the 2024 election. The index’s repeated failure to break above that ceiling is a red flag. Until the Dow can decisively clear that resistance, caution is warranted. A pullback toward the 43,000 area appears more likely in the near term.

The Dow Jones Industrial Average was trading around 44507 Thursday.

Write to Doug Busch at douglas.busch@barrons.com.