Summary: Markets remain broadly risk-on with major indexes near all-time highs, strong new high/new low ratios, and all key sectors of the “Modern Family” in bull phases, though QQQ needs to hold its 50-Day and semiconductors remain a key to watch. However, mixed volume, gold’s breakout, weakness in Bitcoin, and the start of September seasonality add cautionary risk-off signals.

Risk On

• Markets took a breather near or at new all-time highs in the S&P, though they sold off a bit on Friday on a hotter than expected inflation report. Its important to watch the QQQs to hold above  their 50-Day or swing low from the middle of August as momentum is failing on this leading index. (+)
• New high new low ratio surged higher and is positively stacked and sloped. (+)
• Risk gauges remain strongly risk-on, though it did deteriorate slightly due to the strength in Gold. (+)
• On a short-term basis, value seems to be holding up a bit better, but they are both in bullish phases and as long as one of them doesn’t dip into a warning phase its still risk on. (+)
• All six members fo the modern family are in a bull phase. We are watching semiconductors closely to hold the 280 level and its 50-Day Moving Average. (+)
• Both emerging and more established foreign equities remain in a bull phase. If they can maintain their bull phases, the global equity market rally should continue. (+)

Neutral

• Volume patterns improved a bit from last week, but still mixed overall with about the same number of accumulation days as distribution over the last two weeks. (=)
• Market internals came off a little from last weeks highs/breakouts, though they are still broadly neutral to positive. (=)
• The color charts (moving average of stocks above key moving averages is positive across all-time frames for the IWM, mostly positive on the SPY, and skewing neutral on the QQQ. (=)
• Aggs continues their bullish action, closing at some of its highest levels since March, indicating some inflationary pressures. At best, its neutral for the market. (=)
• Yield curve steepened slightly. (=)
• Sentiment readings perked up slightly into Friday’s sell-off, but remains near its lowest levels in a bear phase, however the ratio of one month volatility verses 3 month crossed its moving average from very overbought levels which could be viewed as risk off  (=)

Risk Off

• Risk-off sectors like gold miners, energy, and materials up, while semiconductors, biotech, and retail were down, more of a risk-off skew. (-)
• Gold finally broke out of its months-long trading range, breaking out to new all-time highs on an intra-day and closing basis, outperforming the S&P over the last couple weeks. (-)
• Bitcoin is looking a little shaky, after taking out its all-time high, its sold off below it’s 50-Day Moving Average and closed on its recent lows on Friday. (-)
• Markets are entering one of the worst seasonal periods in September. (-)

For Actionable Trading Guidance:

1. Equities – Stay Long, Monitor Key Levels

• Bias: Maintain core long exposure to equities, as broad indexes (S&P, IWM, DIA) remain in bull phases and risk gauges are mostly risk-on.
  
• Action:
  
  • Hold positions in leading sectors (semiconductors, retail, transports, biotech) but watch QQQ at its 50-Day and semiconductors at 280 as key support levels. If those levels break, trim exposure.
    
  • Consider adding to value-oriented ETFs (e.g., VTV, IWD) given short-term relative strength.

2. Risk-On Expansion – Emerging/Foreign Equities

• Bias: Global rally intact as both emerging and developed foreign markets remain in bull phases.
  
• Action: Initiate or add to positions in EEM, VWO, or country-specific ETFs showing relative strength.
  
• Stop: Tighten stops just below 50-Day MAs to avoid drawdowns if risk-off accelerates.

3. Risk-Off Hedges

• Gold & Commodities: Gold’s breakout to all-time highs is a risk-off warning.
  
  • Action: Add a partial gold hedge (GLD, GDX) to balance equity exposure, but size modestly (5–10%) given inflation link.
    
• Bitcoin: Technical breakdown under the 50-Day is bearish.
  
  • Action: Avoid new longs; short-term traders could consider a tactical short/hedge below recent lows with stops just above the 50-Day.

4. Seasonality & Volatility

• September Seasonality: Historically weak month for equities.
  
  • Action: Reduce leverage, take partial profits into strength, and be prepared to rotate quickly if breakdowns confirm.
    
• Volatility: Still near lows, providing favorable entry for hedging.
  
  • Action: Consider buying protective puts on QQQ or SPY while volatility premiums remain relatively cheap.

5. Risk Management

• Stops: Place stops under key index levels (QQQ 50-Day, SPY August swing lows, SMH 280).
  
• Position Sizing: Keep equity allocation overweight but layer in 10–20% defensive hedges (gold, volatility, cash) to account for seasonality and risk-off signals.
  
• Review Weekly: Reassess if risk gauges shift, particularly if more sectors dip into warning phases.