Summary: Despite a sharp selloff led by technology that pushed the SPY and QQQ below their 50-day moving averages, the broader market remains in a cautiously constructive position as market internals, the 52-week new high/new low ratio, intermarket risk gauges, and most members of the Modern Family continue to support a longer-term risk-on backdrop. However, weakening leadership in growth and semiconductors, deteriorating QQQ internals, defensive sector leadership, rising volatility, higher oil prices amid Middle East tensions, and softer foreign markets suggest risk is increasing and investors should closely watch key support levels and intermarket relationships for signs of a more meaningful shift toward risk-off.

Risk On

• The modern family, with the exception of semiconductors, looks fairly healthy with new highs in transportation and bull phases in five of the six members. (+)
• DIA and IWM closed in better relative condition to their SPY and QQQ peers which could indicate healthy rotation from tech. (+)
• The S&P 500  52-Week new high new low ratio actually improved on the week.(+)
• Risk gauges remain at 100% with all the intermarket relationships pointing to risk-on, though SPY/TLT looks like it could flip. (+)
• Value and growth are both trading blows relative to the broader market with Growth moving into a warning phase on the Friday close, showing a weak risk-on reading. (+) 
• Seasonal trends tend to peak in Mid-July and then resume into early August. (+)

Neutral

• Markets closed lower on the week with the QQQ leading the way, down over -4% with the SPY and QQQ closing below their 50-Day Moving Average, but still contained within the trading range of the last month. (=)
• Market internals for SPY held up relative to the markets, and are sitting right around the same levels we have seen the last few weeks. The cumulative advance-decline line has been holding up well. (=)  
• The color charts (moving average of stocks above key moving averages) show risk-on in the longer-term readings across the board, with more mixed readings on short-to-intermediate terms in-line with the market internals and QQQ being the weakest overall. (=) 
• Gold is holding key levels. (=)
• Bitcoin continued to hold important support levels. The 50-Day Moving average is about $3000 higher. If it can take it out, that may be good for speculative plays. (=)
• With pressure on equities,interest rates eased, potentially signally a bottom is in. It would appear the Fed would have a hard time raising rates if equity markets stay under pressure. Watch the 50-Day Moving average for an early indication. (=)  

Risk-off

• Volume patterns continue to be weak, particularly in QQQ and IWM. (-)
• Sectors were showing a risk-off reading, with energy, consumer staples, and healthcare up, while technology/semiconductors dragged the market down with price action retreating substantially. (-)
• Energy related stocks and sectors were up considerably around increasing tension in the Middle East. (-) 
• Market internals are considerably weaker for QQQ with new recent lows in the McClellan Oscillator and advance-declines. (-)
• The 52-Week new high new low ratio for QQQ  came off strongly on the week.(-)
• Volatility spiked back above its 50 and 200-Day Moving Averages, but hasn’t taken out the two June spikes yet. (-)
• Foreign equities are showing risk-off with both emerging and more established markets coming off. Emerging markets are lagging established foreign equities on short and longer-term readings. (-) 
• Soft commodities rallied, and held those levels on Friday, potentially indicating inflationary pressure, though it is still off the earlier year highs. (-)
• Oil continued to rally this week, up over 20% since the beginning of July, due escalating hostilities in the Middle East. This week extended the initial bounce. Very news driven, but giving risk-off reading now. (-)

Actionable Trading Plan

• Maintain a cautiously bullish posture, but reduce aggressive exposure. The longer-term evidence still favors a risk-on environment, with intermarket relationships, the Modern Family, and broad market internals remaining constructive despite this week's weakness.
• Respect the 50-day moving averages. The SPY and QQQ have both closed below their 50-day moving averages. Wait for a decisive recovery above these levels before adding meaningful exposure, particularly to technology and growth names.
• Favor relative strength. Lean toward areas holding up best, including industrials, select value-oriented stocks, transportation, and small-cap names, while avoiding the weakest areas of the market until leadership improves.
• Remain selective with technology. Semiconductors and high-growth technology have become the weakest part of the market. Avoid trying to catch falling knives and wait for improving breadth, stronger volume, and confirmation that growth is reclaiming leadership.
• Monitor market internals closely. The next several sessions should determine whether the recent weakness is simply a pullback within an ongoing bull market or the beginning of a broader correction. Watch the McClellan Oscillator, advance-decline lines, new highs versus new lows, and volume for confirmation.
• Watch volatility and intermarket signals. A failure of the SPY/TLT relationship or another expansion in the VIX above recent June highs would strengthen the case for becoming more defensive. Conversely, improving intermarket readings would support adding risk back into portfolios.
• Keep an eye on macro catalysts. Rising oil prices and Middle East tensions have become important drivers of market sentiment. Continued strength in oil combined with defensive sector leadership would argue for maintaining a more conservative allocation.
• Prepare for seasonal headwinds. With seasonal strength historically peaking around mid-July, expect increased volatility over the coming weeks. Be willing to trim winners into strength, tighten stops on extended positions, and keep dry powder available if a deeper correction presents higher-quality entry opportunities.