Summary: Markets moved into warning phases with oversold conditions showing up across indexes, internals, and moving-average indicators, while only healthcare, biotech, and homebuilders showed notable relative strength. At the same time, heavy distribution, rising volatility, weakening risk gauges, and continued weakness in risk-on assets like semiconductors, technology, and bitcoin reinforced a risk-off backdrop despite seasonal tendencies that normally favor late-year strength.

Risk On

• ---------

Neutral

• All four of the indexes closed in warning phases, though the S&P held its October lows and bounced a bit on Friday. All the indexes got oversold this week on Real Motion. (=) 
• Healthcare, biotech, and homebuilders remained the only strong part of sectors, with risk-on sectors like semiconductors and technology taking a beating. (-)
• Market internals, like McClellan bounced off oversold levels but most remain neutral to negative in-terms of their readings. (=)
• The percentage of stocks above key moving averages bounced off of oversold readings. (=)
• Both value and growth had a difficult week, closing in warning phases. (=)
• In the modern family, biotech looks very strong and regional banks showed some strength on Friday, a potential healthy rotation but needs more confirmation. (=)
• Foreign equities mirrored U.S. markets on recent price action. (=)
• Soft commodities put in a new multi-month low and are in a bear phase. Potentially showing easing inflationary pressures, though it could also be from a strengthening dollar. (=)
• Sideways action in Gold, digesting its parabolic move. (=)
• Rates rallied on Friday, particularly short-term rates, with a potential hint at another rate cut in December. (=)
• November, typically a strong seasonal period, has seen markets underperform expectations by around 5% in the S&P, though the last six weeks of the year tend to be strong. (=)

Risk Off

• Volume patterns skewed heavily towards distribution across the board. (-)
• Healthcare, biotech, and homebuilders remained the only strong part of sectors, with risk-on sectors like semiconductors and technology taking a beating. (-)
• The 52 New High /Low ratio continues to deteriorate for both the NASDAQ 100 and the S&P500
• The color charts (moving average of stocks above key moving averages) is negative across the board. (-)
• The risk gauge deteriorated from neutral to risk-off because of the relative strength in gold and bonds. (-)
• Volatility surged this week, trading above its 200 and 50 Day Moving Average. If we can get a close above the 40 in short-term futures, it could set off an explosive sell off. On a slightly positive note we did hit fairly oversold levels on Thursday but the moving average of the 1 month versus 3 month VIX is accelerating to the downside  (-)
• Bitcoin continued its negative slide, putting in its lowest levels since April. (-)

Actionable Trading Plan 

-
1. Short-Term Tactical Bias: Mean-Reversion With Tight Risk

The indexes are oversold on Real Motion and breadth (% above MAs), so the short-term edge favors mean-reversion bounces, but:

• Size smaller than normal
  
• Hold shorter than normal (2–5 days)
  
• Only take setups with clear reversal triggers
  (e.g., reclaiming prior day high, RSI/McClellan reversals, ignition candles)
  

This uses oversold conditions without betting on a full trend reversal.

-
2. Sector Rotation: Favor Strength Over Beta

With biotech, healthcare, and homebuilders showing relative strength:

• Allocate incremental exposure only to leaders holding bull or recovery phases
  
• Avoid or underweight risk-on sectors breaking trend (tech, semis)
  
• Use pair-trade logic: long relative strength vs. short relative weakness (model-level, not personal)
  

This reduces market-direction dependency and captures money flows.

-
3. Risk Management Under Volatility Spike

With volatility above its 50DMA and 200DMA:

• Reduce gross exposure during elevated VIX
  
• Use wider stops with smaller positions to avoid getting shaken out
  
• Avoid initiating new longs on days when VIX futures approach 40—that level risks an accelerated selloff
  

The goal is to stay reactive, not predictive.

-
4. Intermediate-Term Playbook: Wait for Confirmation Before Trend Re-Risking

To add medium-term risk (multi-week holds), require:

• Breadth thrust or %-above-MA improvement
  
• Volatility dropping back under the 200DMA
  
• Distribution days < accumulation days
  
• SPY or QQQ reclaiming the 20DMA
  

No confirmation = keep exposure defensive, small, or relative-strength-focused.

-
5. Gold, Bonds, and the Risk Gauge

With gold and bonds strengthening (risk gauge → risk-off):

• Avoid adding cyclical exposure until the risk gauge flips
  
• Use defensive positions (model-level) as a temporary ballast
  
• Watch for reversal in gold — sideways digestion after a parabolic move can precede a broader risk rally
  

This supports capital preservation while waiting for the next expansion cycle.

-
6. Crypto / Bitcoin Framework

With Bitcoin at multi-month lows:

• No dip-buying until:
  
  • It reclaims the 10DMA and
    
  • Momentum shifts positive on Real Motion
    

Otherwise treat it as a drag on risk sentiment, not a long setup.

-
7. Holiday / Year-End Seasonality Setup

Given that November underperformed by ~5% relative to seasonal norms yet the final six weeks are historically strong:

Prepare for—but do not front-run—a potential year-end rally.

Re-risking triggers:

• VIX breaks down
  
• Improvement in color charts
  
• Value and growth exit warning phases
  
• Regional banks show continuation (early rotation tells)
  

Once triggered, scale in gradually over 3–4 entry points.