Summary: Markets continue to lean risk-on despite mixed index performance, as improving market breadth, stronger risk gauges, subdued volatility, healthy leadership rotation beyond semiconductors, and favorable seasonality outweigh the importance of the SPY and QQQ testing their 50-day moving averages. The primary uptrend remains intact as long as growth holds above its 200-day moving average, though weak volume, continued bond weakness, and the potential for semiconductor selling to spread more broadly remain the key risks to monitor.

Risk On

• Markets were mixed again with some rotation with out of frothery QQQ stocks and IWM down while SPY and DIA were up modestly. Both SPY & QQQ are sitting right on its 50 Day Moving Average, which will be important to watch. (+)
• Market internals continued to improve for the SPY & NASDAQ Composite with the McClellan Oscillator staying positive and up/down volume, and advance decline all trending higher. (+)
• The 52-Week new high new low flipped positive in stack and slope. (=)
• The color charts (moving average of stocks above key moving averages) are showing positive readings across the board on longer-term to intermediate term. (+) 
• Risk gauges improved to 80% with the SPY outperforming high-yield debt and treasuries. (+)
• Volatility revisited its mid-June lows after spiking in the prior week. Cash vix is in a bear phase. (+)
• Value continues to lead in a strong bull phase while growth made an attempt to reclaim its 50-Day Moving Average. As long as growth stays above its 200-Day Moving Average, the overall picture is still risk-on. (+)
• The modern family looks strong with a healthy rotation out of semiconductors and strong performance from all members including new highs in KRE, IBB, IYT, and IWM. It will be important to watch if the sell-off in semiconductors leads to a broader sell-off. So far we are not seeing that. (+)
• Emerging markets backed off, though EFA held. Their June lows look like an important level to hold to maintain their overall bullish trend. (+)
• Broader Seasonal trends remain quite bullish for equities through the end of July. (+)

Neutral

• Volume patterns in the SPY and QQQ are very weak and diverging from the neutral readings in DIA and IWM. A weak neutral overall. (-)
• Sectors were mixed with technology and energy down, while healthcare and consumer discretionary up, with a slight positive return skew overall across the sectors. (=)
• The color charts (moving average of stocks above key moving averages) are showing negative readings across all indexes in the short-to-intermediate periods. (=) 
• Soft commodities held above its 200-Day Moving Average in the middle of a long-term trading range. (=)
• Gold bounced off its recent lows, through the 50-Day Moving Average crossed below the 200-Day Moving Average, putting it in a bearish phase. (=) 
• Oil continued to sell off this week, though losing a little momentum on the downside. It may be subject to some mean-reversion considering the continuing elevated tensions with Iran.(=)
• Bitcoin continued to hold important support levels. (=)

Risk-off

• Bonds sold off this week and are in bear phases across the board and all ends of the yield curve and flirting with recent lows(-)
• Semiconductors and Technology  which has led this market up with parabolic moves are under pressure with negative TSI momentum divergences (-)

Actionable Trading Plan

• Maintain a moderately risk-on posture while the SPY and QQQ remain at or above their 50-day moving averages. Treat this area as an important decision point rather than reacting to day-to-day volatility.

• Favor broad participation over narrow leadership. Continue to emphasize areas showing strong relative strength, including value, financials, industrials, transports, biotech, and small caps, as healthy rotation across leadership groups is typically constructive for the overall market.

• Avoid chasing recent winners in semiconductors. The recent pullback appears to be a rotation rather than the start of a broader breakdown, but monitor whether weakness remains contained or begins to spread into the rest of the market.

• Use market internals as confirmation. Improving breadth, positive McClellan Oscillator readings, favorable new high/new low trends, strong longer-term color charts, and improving risk gauges continue to support maintaining equity exposure.

• Watch the key technical levels closely. The SPY and QQQ 50-day moving averages are the first line of support, while Growth holding above its 200-day moving average remains an important indication that the longer-term bull trend is intact.

• Remain patient with international markets. Emerging markets have pulled back but remain constructive as long as June support levels hold, while developed markets continue to provide confirmation of the broader bullish trend.

• Expect normal volatility rather than major trend changes. Falling volatility, strong seasonal tendencies through the end of July, and improving market participation suggest pullbacks may continue to present buying opportunities rather than reasons to become aggressively defensive.

• Become more defensive if conditions deteriorate. A decisive break below the SPY and QQQ 50-day moving averages accompanied by weakening breadth, deteriorating risk gauges, expanding volume on declines, or growth falling below its 200-day moving average would warrant reducing equity exposure and raising cash until conditions improve.