Summary: Markets remain risk-on but weakening, with bullish phases intact across indexes and supportive seasonality into mid-February, even as momentum fades, leadership narrows, and value continues to outperform lagging growth. Risk is rising, with deteriorating market internals, mixed breadth and volume, warning phases in tech and growth, a volatility uptick, and renewed pressure from macro cross-currents like the dollar, commodities, and crypto.

Risk On

• With the exception of the Russell, which gave back some of its recent gains, the indexes were mixed to flat on the week. Market phases are still bullish across the board, however, momentum as measured by real motion is clearly waning on daily charts and on a positive note weekly charts are still intact. A weakening but still risk-on reading for the markets. (+)
• The color charts (moving average of stocks above key moving averages) for IWM is still broadly positive across all time frames despite this week’s sell off. (+)
• Retail lost its bull phase, though the rest of the modern family remains strong across the board. (+)
• Seasonal patterns for equities remain strong through mid-February. (+)

Neutral

• Volume patterns are a weak neutral and only the NASDAQ 100 is showing an equal number of accumulation vs distribution days over the last two weeks. (=)
• Geopolitical stress and some severe weather conditions drove energy up on the week. (=)
• Gold, gold miners, silver, all got hit extremely hard on Friday, a bit of a mixed signal on geopolitical stress. (=)
• The color charts (moving average of stocks above key moving averages) is showing very mixed readings in the QQQs across all time frames. (=)
• Risk gauges improved to neutral with the strength in high yield debt vs US treasuries. (=)
• Volatility is showing some short-term strength, potentially breaking out of a base. (=)
• Value stocks put in a new high while growth continues to lag and is now trading under its 50-Day Moving Average in a warning phase. (=)
• Gold has a big down day Friday (over -10%), giving back the last half of January’s gains. (=)
• The dollar put in new recent lows this week, though it popped a little on Friday. (=)
• Rates continue to trade in a wide range. (=)

Risk Off

• More sectors were down on the week. Energy and utilities led the sectors higher, while retail, tech, and healthcare were weak. The technology sector moved into a warning phase on Friday's close. (-)
• Market internals took a decisive negative turn in the McClellan Oscillator, Up/down volume ratio, and advance declines for both Nasdaq and S&P. (-)
• New high new low ratio flipped negative. (-)
• Bitcoin is currently trading below important support ….. its November lows. (-)

Actionable Trading Plan

Maintain a measured risk-on posture, but recognize that the market is transitioning into a more fragile phase as momentum wanes and market internals weaken. While longer-term market phases remain bullish and seasonal trends are supportive through mid-February, the deterioration in breadth, leadership, and growth momentum argues for more selective positioning and tighter risk control rather than broad exposure.

Equity positioning should favor relative strength and defensive leadership. Continue to overweight areas showing resilience such as value-oriented exposures, energy, and utilities, which are benefiting from macro uncertainty and shifting leadership. Avoid adding exposure to technology, growth, retail, and healthcare, particularly where warning phases and poor internals are already evident. Any rallies in these weaker groups should be treated as counter-trend or tactical unless internal indicators materially improve.

Risk management should be proactive, not reactive. Position sizes should be reduced from aggressive levels, stops should be tightened, and portfolios should be reviewed with the assumption that volatility may expand. If volatility continues to break out or market internals deteriorate further (breadth, advance-decline, up/down volume), exposure should be reduced promptly rather than waiting for index-level breakdowns.

Remain flexible across asset classes. Commodities and precious metals experienced sharp downside reversals and should be approached cautiously until price and momentum stabilize. Rising geopolitical uncertainty and weather-driven energy moves argue for tactical exposure rather than long-term conviction trades. Bitcoin’s failure to hold recent support reinforces the need to keep speculative assets underweight until risk appetite improves.

Cash remains a valid allocation. With mixed signals across equities, rates, currencies, and commodities, maintaining dry powder allows portfolios to respond quickly to either renewed risk-on confirmation or a broader risk-off transition. Re-engage more aggressively only if market internals stabilize and leadership broadens back toward growth and technology.