Summary: Markets remain in a broadly bullish risk-on environment, with the DOW making new highs, volatility falling to its lowest levels since January, and leadership from semiconductors, retail, and growth stocks supporting continued upside momentum across both domestic and international equities. However, mixed internals, weak breadth divergences, rising rate volatility, and lagging crypto and communication sectors suggest underlying participation remains uneven and could lead to short-term consolidation despite the strong headline indexes.

Risk On

• Markets are just fractionally off new highs with the DOW making new highs. The real motion readings are also healthy and not overbought on the daily, though on the weekly charts, real motion is running a little rich, especially on QQQ and SPY. (+)
• Sectors were nearly all up with the exception of Gold Miners and communications. We had a very important bounce in retail, which was up over 4% on the week, and continued parabolic moves in Semiconductors. (+)
• Volatility hit its lowest levels since January. Risk on. (+)
• Risk gauges remain at 80%, though the wood/gold ratio is looking to flip positive. (+)
• Value put in new all-time high with growth leading. (+)
• Emerging and developed markets look strong with both in bull phases and modest real motion values. (+)
• The modern family responded well this week with retail regaining its 50-Day moving average and bouncing off of its triple bottom/six-month lows. (+)
• Seasonal trends remain bullish for the next couple of months, though late May can experience a little weakness. (+)

Neutral

• Volume was mixed, with strong accumulation in DIA in contrast with QQQ with no accumulation days in the last two weeks. (=)
• The market internals are giving a mixed read, with the McClellan Oscillator right at the mid-point, up down volume looking good, but Advance-decline weak - a divergence as the market hits new all-time highs. (=)
• The new high new low ratio still looks shaky with the 10 under the 21 day. It's showing some short-term strength but the longer-term trend is still negative. (-)
• The color charts (moving average of stocks above key moving averages) improved to a neutral reading with the QQQ looking positive. (=)
• Soft commodities sold off sharply this week, but still in a bull phase and now underperforming the SPY–potentially indicating some easing of inflationary pressures and should be positive for the market. (=)
• Rates spiked to 20-year highs before coming off those sharply, possibly signally a trend reversal. (=)
• Crypto continues to show low correlation to the overall market, with it being down and still well off highs even as the market pushes new highs. (=)

Risk-off

• Oil closed lower on the week, showing potential easing of concerns in the gulf, though still quite elevated. One important thing to note is that momentum flipped negative for the first time since early 2026 so if we take out 130 in USO that could reverse our risk off read for the markets based on oil  (-)

Actionable Trading Plan

The market remains in a constructive risk-on environment, so the primary strategy is to stay net long while becoming more selective and tactical as momentum stretches on the weekly timeframe and internals remain mixed. Focus on buying pullbacks rather than chasing extended names, particularly in leading areas such as Semiconductors, Retail, Growth, and selective international exposure, while maintaining tighter risk controls given weakening breadth and elevated rates volatility.

Tactical Positioning

• Maintain an overweight toward:
  • Technology and Semiconductors
  • Consumer Discretionary/Retail
  • Growth with selective Value exposure
  • Developed and Emerging Markets
• Underweight or avoid:
  • Communications
  • Gold Miners
  • Weak breadth/lagging speculative areas
  • Overextended commodity trades
    .

Entry Strategy

• Prefer entries on:
  • Pullbacks into the 10-day or 21-day moving averages
  • Short-term volatility spikes
  • Retests of breakout levels
• Avoid aggressively chasing:
  • Parabolic semiconductor moves
  • Extended mega-cap growth after large gaps higher
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Risk Management

• Raise trailing stops modestly tighter than normal due to:
  • Weak advance-decline data
  • Lack of accumulation in QQQ
  • Fragile new high/new low readings
  • Weekly momentum becoming extended
• If SPY or QQQ lose their 21-day moving averages on heavy volume, reduce exposure incrementally rather than all at once.
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Rotation Watch

Key signals to monitor over the next 1–2 weeks:

• Retail holding above its 50-day moving average would confirm improving consumer participation.
• A positive flip in the wood/gold ratio would strengthen the broader risk-on case.
• Falling rates after the recent spike could fuel another leg higher in growth.
• Continued deterioration in breadth while indexes make new highs would raise the odds of a sharp short-term correction.
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Tactical Opportunity

Volatility at multi-month lows favors:

• Selling into euphoric upside extensions
• Buying controlled dips
• Avoiding excessive hedging costs unless volatility expands meaningfully
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Portfolio Stance

Current environment favors:

• Moderately aggressive exposure
• Tactical trend following
• Incremental profit-taking into strength
• Keeping some dry powder available for late-May seasonal weakness or breadth-driven pullbacks