U.S. and Canadian Equities Advance Amid Declining Volatility

U.S. equity indices continued to show broad-based strength over the past month and quarter, with particularly notable momentum in tech-related benchmarks. The NASDAQ Composite (NASD.I) advanced +6.60% in the last month and +9.31% over the past three months, bringing its YTD gain to +3.43%. The S&P 100 (OEX.I) and S&P 500 (SPX.I) followed closely, rising +5.95% and +4.99% over the month, respectively, suggesting sustained large-cap leadership. Despite these gains, small-cap performance remains a relative laggard; the Russell 2000 (RLS.I) is up just +1.39% over three months and remains down -4.68% YTD, which may indicate more selective investor risk appetite. Interestingly, the AMEX Composite (AMEX.I) surged +11.24% over three months and +23.30% YTD, potentially reflecting outperformance in commodity-linked or micro-cap names. Canadian indices remain more uniformly positive across all timeframes. The S&P/TSX Composite (TSX.I) posted a +4.84% three-month gain and is up +7.43% YTD. The TSX Venture Composite (JX.I), often a proxy for speculative growth, climbed +11.15% over three months and +20.22% YTD. Mid- and small-cap segments also performed well, with the S&P/TSX Canadian MidCap (TX40.I) and SmallCap (TX20.I) indices rising +8.78% and +7.81% over the past three months, reinforcing broad-based strength in Canadian equities. Volatility has trended sharply lower despite equity gains. The SPX Volatility Index (VIX.I) and NASDAQ Volatility Index (VXN.I) declined -24.81% and -24.87% over the past month, respectively. These declines, alongside negative YTD readings, may suggest increased investor confidence or reduced demand for near-term hedging. However, such rapid drops in implied volatility could also imply complacency at elevated equity levels. Fixed income markets reflect a steepening bias, with a clear divergence in yield movements across the curve. The 5-Year Yield Index (FVX.I) is down -5.66% over one month and -12.17% YTD, while the 30-Year Yield (TYX.I) has begun to rise, gaining +3.99% over three months and +1.17% YTD. The 10-Year Yield (TNX.I) sits between the two, reflecting muted movement recently. This curve behavior may suggest shifting expectations around inflation persistence or longer-term growth. Sector performance was led by strength in Consumer Staples and Technology. Consumer Staples rose +21.17% over three months and +11.06% YTD, indicating possible defensive positioning. Electronics & Semiconductors climbed +17.94% over three months, supported by broader Information Technology gains of +13.54%. Conversely, industries like Consumer Durables and Insurance posted weak YTD performance, at -9.92% and -9.58% respectively. This divergence may reflect ongoing investor rotation and sensitivity to rate-driven valuation pressures.

Recent escalations in the Iran–Israel conflict, including Israeli strikes on Iranian nuclear sites, ballistic missile exchanges, and a fragile ceasefire brokered by President Trump, have driven significant short-term volatility in oil markets. Crude spiked amid fears of a Strait of Hormuz blockade and broader supply disruption, only to retrace sharply (dropping over 7% to under $70/bbl) once the ceasefire took hold. Trump’s direct warnings, demanding Iran’s "unconditional surrender" and cautioning Israel, have further influenced sentiment, with markets now balancing geopolitical risk against abundant global supply. As tension ebbs, traders are shifting focus from headlines to actual disruptions, suggesting continued choppiness in crude, with the next breakout likely tied to any new developments in Middle East dynamics.Turning to the chart of WTI Crude Continuous Contract (WTICRUDE), we can see the last couple months of trading where prices moved up from spread quadruple point and figure breakdown levels in May (below $60) to a run-up to almost $75 before swinging into yet another column of Os. Here, support is now potentially again at the prior breakdown level of $62.73, with more potential support at $55.70, while a zone of support that extends back to 2022 lies between $47.54 and $46.61. Resistance on the other hand is observable on the point and figure chart initially at $79.56, followed by other pockets of resistance at $86.12 and $91.39. Also highlighted on the chart is the SMAX score, which currently has a weak reading of 1 out of a best score of 10, indicating poor near-term relative strength against other asset classes.

Having reviewed the point and figure chart above under a 2% scale, we now zoom out to a 5% chart to capture the long-term nature of its price movement. After plummeting to near zero during the COVID-19 shutdown, crude has reversed course to produce what may be a potential flagpole. In hindsight, the last several years of consolidated trading between $60 and $100 may be producing what increasingly resembles a flag formation. A flag pattern in traditional technical analysis consists of a sharp price movement (the flagpole), followed by a consolidation period that slopes slightly against the trend (the flag). This structure typically signals a pause before continuation in the same direction.This price action may reflect a temporary balance between supply and demand before a possible breakout. A move beyond this consolidation zone could confirm the pattern and indicate further movement in the direction of the initial trend. In light of the highly volatile situation in the Middle East and the lingering possibility of disruptions in the Strait of Hormuz, this setup is worth monitoring closely. Here, the number $83.66 may become an important level to set SIA Alerts for a breakout past old resistance that could signal the completion of this flag to the upside. On the support side, the lower boundary of the flag may provide a floor in the $53 to $46 area, a level that oil producers have said would begin to disincentivize new drilling activity.