Is the Stock Market Entering a New Bull Cycle?

The stock market has long been a theater of cycles—bull and bear, euphoria and capitulation. But in August 2025, a rare signal from one of the most respected technical analysts of our time, Walter Deemer, has sparked a compelling question: Is the market on the cusp of a new bull cycle?

Deemer's volume-based signal, a 91.5% upside volume day on August 22, 2025, is a historical anomaly. This metric, calculated as up-volume divided by total volume (UVOL/(UVOL+DVOL)), reflects a surge in buying pressure that typically marks the early stages of a major trend. Such readings, as Paul Desmond of Lowry's Reports notes, are “associated with trend reversals and strong market opportunities.” The S&P 500 and Nasdaq surged 1.5% and 1.9%, respectively, on this day, with the Dow hitting a record high. The confluence of heavy volume and a historically significant upside ratio suggests the market may be transitioning from a period of consolidation to a new upward phase.

The Post-Tariff Landscape: Volatility and AI-Driven Resilience

The 2025 market environment is shaped by two conflicting forces: the drag of protectionist tariffs and the tailwinds of AI-driven productivity. Tariffs on imports from China, Japan, and the EU—ranging from 15% to 50%—have disrupted global supply chains, squeezing margins for sectors like semiconductors and cloud infrastructure. Smaller cloud providers face margin contractions of 12–15%, while larger players like NVIDIA and Amazon Web Services absorb costs in the short term.

Yet, AI is emerging as a counterbalance. Federal initiatives like the CHIPS and Science Act, coupled with a 25% investment tax credit, have catalyzed over $1 trillion in private-sector investment by 2026. AI is already reducing operational costs in finance by 30% and boosting manufacturing output per worker by 40%. NVIDIA's projected 60% revenue growth for 2025 underscores the demand for AI-specific silicon.

Deemer's Methodology: Volume, Breadth, and Contrarian Cues

Deemer's analysis goes beyond volume. His concept of “breakaway momentum”—when the NYSE's advancing-to-declining issues ratio exceeds 1.97 over 10 days or 1.72 over 20 days—has historically signaled strong upward momentum. In August 2025, the market's breadth metrics aligned with these thresholds, reinforcing the case for a trend reversal.

Additionally, Deemer's focus on “washed-out stocks”—those that have been heavily sold off to the point of exhaustion—offers contrarian insights. These stocks often exhibit sharp declines to 52-week lows, followed by brief bounces and subsequent declines to higher lows with reduced volume. Such patterns suggest potential reversals, particularly in sectors like industrials and consumer discretionary, where tariff-related sell-offs have been pronounced.

Strategic Implications for Equity Investors

The interplay of Deemer's signal and the AI-driven economy demands a nuanced approach. Investors should prioritize sectors with tariff-resistant business models and AI-enabled scalability:
1. Semiconductors and AI Hardware: Intel and AMD benefit from the CHIPS Act, while NVIDIA's dominance in AI silicon positions it for sustained growth.
2. Cloud Providers with Hybrid Strategies: AWS and Microsoft Azure are shifting operations to Vietnam and Mexico to bypass tariffs, while leveraging tiered pricing to offset costs.
3. AI Software and Services: Firms like Palantir and C3.ai, less exposed to hardware tariffs, are seeing surging demand for analytics and automation.

Conversely, sectors like autos, metals, and traditional semiconductors face margin pressures from tariffs. Investors should underweight these cyclicals until trade tensions abate.

Navigating the Bull Case: Risks and Opportunities

While Deemer's signal and AI-driven growth present a bullish case, risks remain. The U.S. Treasury's 131% year-over-year increase in tariff revenue ($124 billion in Q1–Q3 2025) signals a shift in economic power toward the federal government. If regulatory burdens escalate, innovation could stall. Additionally, geopolitical fragmentation—such as divergent AI standards between the U.S. and its allies—could limit the global reach of American AI firms.

Investors should also monitor the Federal Reserve's response to inflation and employment data. A prolonged pause in rate cuts could dampen market sentiment, particularly in high-growth sectors. However, the “Re-Employ America” fund, which supports reskilling displaced workers for AI-related roles, offers a buffer against labor transition risks.

Conclusion: A New Bull Cycle?

Walter Deemer's rare volume signal, combined with the AI-driven transformation of the economy, suggests the market may be entering a new bull cycle. The August 2025 rally, supported by breakaway momentum and a historically significant upside volume ratio, indicates that the market is not at exhaustion but at a potential inflection point.

For investors, the path forward lies in balancing short-term volatility hedging with long-term growth positioning. Overweighting AI-driven sectors, diversifying geographically, and leveraging bond strategies to hedge against rate uncertainty will be key. As Deemer's career has shown, markets often provide clues to their future direction long before those directions become evident in price action. The question now is whether investors are ready to act on them.