Big View Bullets for 11/02/2025
Market Summary
Markets surged to new highs this week led by the Nasdaq, with strong seasonality, improving volume, and a full risk-on reading from the risk gauge—even as sectors and the Economic Modern Family showed mixed participation and retail lagged. However, internal weakness emerged beneath the surface with a negative McClellan Oscillator, a Hindenburg signal, rising volatility, and softening breadth indicators, warranting caution despite the bullish momentum.
Risk On
- Markets were up strong this week with Nasdaq leading the way +4.29% (+)
- Volume flipped back to risk-on with more accumulation days than distribution, with the exception of the Russel, confirming concerning price action in that index. (+)
- Risk gauge flipped to 100% risk on with the weakness in gold. (+)
- Growth stocks continue to lead value while making new highs and both are still in bull phases. (+)
- Foreign equities were down to flat on the week, though still in bull phases. (+)
- We are entering one of the strongest seasonal months, November. (+)
Neutral
- Sectors were more mixed, with strength in technology and biotech though retail was particularly weak. (=)
- The Economic Modern Family is giving a mixed read, with semiconductors and biotech pushing to new highs, while regional banks are flirting with a distribution phase and grandma retail got mugged and moved into a warning phase. (=)
- Gold put in a new low from its most recent peak in October, though it is still in a bull phase. (=)
- The Federal Reserve cut the rate by a quarter point this week, though they cast doubt on a potential December cut. Rates were up slightly on the week. (=)
Risk Off
- Despite the market making new highs, volatility rose and the cash vix closed in a strong recovery phase. (-)
- Market internals weakened with the McClellan Oscillator back into negative territory. (-)
- Wednesday saw a Hindenburg signal. Risk-off. (-)
- The color charts (moving average of stocks above key moving averages) have weakened collectively, particularly on 20 and 50 periods. (-)
Actionable Trading Plan
✅ Primary Bias: Risk-On, Trend-Following With Tactical Risk Controls
The market remains in a strong bullish phase, reinforced by a full Risk-On reading, strong seasonal tailwinds, and leadership from growth/tech/biotech. However, weakness in internals and a Hindenburg signal suggest tightening stops and maintaining tactical hedges while leaning into strength.
📈 Equity Exposure
Target Exposure: 85–100% of equity allocation
Add exposure on strength & dips in leadership areas
Focus Longs
- Large-cap growth & AI tech (QQQ, SMH, XLK, leading megacaps)
- Biotech momentum continuation (XBI, IBB)
- Semiconductors new highs breakout (SMH)
Entry Tactics
- Add on pullbacks to 20-day moving averages OR breakouts from consolidation highs
- Use partial scaling: enter 50% now, add 50% on next confirmation day
Stops
- Initial stops: 2–4% below breakout level or 20-day MA
- Tighten stops if internals continue weakening
🛑 Risk Management / Hedges
Given rising volatility & Hindenburg trigger:
- Maintain 5–10% hedge exposure via:
- Inverse index ETF (e.g., PSQ/SQQQ for QQQ, IWM puts given Russell weakness)
- VIX calls as an inexpensive tail hedge (30–60 days out)
Trigger to Increase Hedges
- McClellan stays negative > 3 days, OR
- 20-day MA breaks in SPY/QQQ, OR
- Major sector leaders break trend
🏦 Rotation & Weakness Areas
Avoid/underweight:
- Retail (XRT) until strength returns — “Grandma” is weak
- Regional banks (KRE) near distribution phase
- Emerging markets tactically (momentum pause)
Hold tactical gold only if above 200-day; otherwise stay sidelined.
🌬️ Volatility Strategy
- Sell premium selectively until VIX stabilizes (credit spreads preferred)
- Avoid oversized leveraged positions given volatility recovery
🎯 Targets & Signals to Watch
Upside continuation signal
- New highs with improving McClellan + VIX stabilizing/down
Risk-Off trigger to reduce equity exposure
- SPY/QQQ break 20-day AND internals stay weak
- Semiconductors lose leadership
