Summary: Markets continued their powerful rally, marking nine straight weeks of gains with leadership from technology, semiconductors, and other risk-on sectors, while volatility remained subdued and seasonal trends stayed favorable. However, beneath the surface, market participation and internals remain only modestly improved, with weak retail action, mixed volume, and shaky breadth suggesting the advance may still be somewhat narrow and vulnerable to pullbacks.

Risk On

• Markets have been up 9 weeks in a row, an occurrence that happens about once every seven years. The real motion is also not overbought, indicating more upside may be possible. (+)
• Consumer staples, energy, and utilities were all down, giving a strong risk-on indication with technology and semiconductors leading the market higher. (+)
• Clean energy was one of the strongest sectors this week. (+)
• The new high new low ratio improved a bit but still looks shaky with the 10 under the 21 day. More of a weak-positive reading. (+)
• The color charts (moving average of stocks above key moving averages) are showing positive longer-term readings, with a bit more mixed on the shorter-term. (+) 
• Value put in new all-time high with growth leading. (+)
• The modern family looks strong overall with 5 of the members in bull phases and semiconductors hitting new highs (though the other four aren’t at new highs). Granny Retail is the one spot that continues to have issues and closed back in a warning phase, adding a note of caution to the overall picture. (+)
• Volatility continued lower this week to its lowest readings since January. (+)
• Risk gauges remain at 80% with the strength in bonds outperforming high-yield debt. (+)
• Emerging and developed markets look strong with both in bull phases and modest real motion values. (+)
• Soft commodities continued its recent selloff, breaking down into a warning phase, indication some easing in inflationary pressures. (+)
• Seasonal trends remain bullish for equities over the next few months. (+)

Neutral

• Volume remains mixed, with strong accumulation in DIA and more neutral in the other indexes. (=)
• Despite the robust move across the key indexes, market internals improved only marginally, most of them sitting around neutral readings with participation remaining thin. (=)
• Gold bounced off of oversold levels and critical support but hasn’t really shown any follow-thru yet. (=)
• Oil was one of the biggest losers this week, potentially indicating easing concerns in the Gulf, but still overall elevated. (=)
• Rates moved back more into a neutral zone, rejecting a test of the 20-year lows. If it can take out the 50-Day Moving Average in IEF (a quarter percent higher), it could signify an increased chance of rate cuts along with other easing inflationary pressures.  (=)

Actionable Trading Plan

The market remains in a strong bullish trend with broad risk-on characteristics, supportive seasonal trends, and volatility continuing to compress. Given the persistence of the move and the lack of overbought real motion readings, the primary strategy should remain tilted toward staying invested while tactically managing signs of weakening breadth and narrow participation.

Maintain an overweight allocation toward leadership areas including technology, semiconductors, and selective growth exposure, as these continue to demonstrate the strongest momentum and relative strength. Clean energy is also emerging as a short-term leadership group and may offer tactical opportunities on consolidations or pullbacks. Emerging and developed international markets continue to act well and can remain part of diversified equity exposure.

At the same time, caution is warranted beneath the surface. Market internals remain only moderately supportive, participation remains thin, and Granny Retail slipping back into a warning phase suggests the rally is not yet fully broad-based. Because of this, avoid excessive leverage or aggressive chasing after extended upside moves, particularly in names that are already significantly above key moving averages.

Use pullbacks into the 10-day or 20-day moving averages as preferred entry opportunities rather than chasing strength after large gap-up moves. Existing profitable positions can continue to trail stops higher underneath recent swing lows or intermediate-term moving averages to protect gains while allowing room for trend continuation.

Continue to underweight traditionally defensive sectors such as utilities, staples, and potentially energy until relative strength improves meaningfully. The weakness in soft commodities and oil, combined with stabilizing rates, may indicate easing inflation pressures and could become increasingly supportive for longer-duration growth assets if bond strength continues.

Watch several key warning signs closely:

• Further deterioration in market breadth or new high/new low ratios
• Continued weakness in retail and consumer discretionary participation
• A sharp reversal higher in volatility
• Failure of semiconductors or technology leadership
• Breakdown in the major indexes below short-term trend support

If breadth meaningfully improves and rates continue stabilizing, the current rally could broaden and support another leg higher. Conversely, if leadership narrows further while internals weaken, be prepared for a rotational correction or consolidation phase despite the bullish index trends.