AI Turns From Friend To Foe.
Will AI Kill The Bull Market?

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Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral.  The video analysis dives deeper.

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Summary: Markets are still broadly risk-on, with leadership in the DOW/IWM and especially strong foreign equities, while S&P internals remain resilient as the advance-decline line hit new highs despite this week’s pullback. However, risk-off signals are building—momentum has weakened across all major indexes, volatility and defensive leadership are rising, and seasonality is turning less favorable, suggesting a more cautious environment even as growth looks oversold.

Risk On

• The rotation into DIA and IWM still remains positive and both are also positive YTD. The longer-term trend (weeklies) remain intact across the board. (+)
• Foreign equities like Korea, Vietnam, and others in Asia were up over 5% this week. (+)
• Despite the sell-off this week, market internals for the S&P held strong and the advance-decline line hit new all-time highs. (+)
• The modern family looks strong across the board, though in some sectors momentum is weakening. (+)
• Foreign equities made new highs this week with positive momentum and strongly leading verses US markets. (+)

Neutral

• Sector rotation shows a roughly even distribution between up and down sectors. Though the best performing sectors this week were typical risk-off sectors like utilities and gold miners. (=)
• The NASDAQ market internals were more mixed. 
• The new high new low ratio perked up a bit on the current reading to neutral. (=)
• The color charts (moving average of stocks above key moving averages) weakened across the board. (=)
• Value continues to make new highs in a strong bull phase, while growth closed below its 200-Day Moving average. Growth is oversold on price and real motion. (=)
• Aggs and copper remain in their recent trading ranges. (=)
• Gold held up relatively well and had a new high close on the weekly charts, indicating continued caution and we could start to see some divergence between the metals and equities. (=)
• Bitcoin recovered nicely on Friday, but needs to clear $71k to prove this bottom. (=)
• Rates are indicating future easing with some important breakouts above trendlines set last November. (=)

Risk Off

• All four key indexes are under their 50-Day moving average of momentum on the Real Motion indicator. (-)
• Both the McClellan Oscillator and the New high new low ratio remains negative for the NASDAQ Composite with much lower absolute levels than the S&P. (-)
• Risk gauge flipped to risk-off with the strength in Utilities and stronger performance in TLT. (-)
• With the exception of the DOW, Volume patterns remain weak. (-)
• Volatility revisited the highs from its recent spikes in January and early February. (-) 
• Seasonally, we are headed into one of the weaker periods of the year for equities. (-)

 

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Actionable Trading Plan 

1) Stay invested, but shift positioning defensive.
Maintain equity exposure, but overweight DOW/value and IWM strength while reducing aggressive growth/Nasdaq exposure until momentum improves.

2) Use foreign equities as a leadership signal.
Favor the strongest international themes (Asia/emerging leaders) as long as they continue making new highs and outperforming U.S. indexes.

3) Treat growth as a tactical “bounce trade,” not a trend trade.
Growth is oversold and may rally, but until it regains key trend strength, keep it as a smaller allocation and require confirmation before adding.

4) Respect the rising risk-off backdrop.
With Real Motion momentum below trend across indexes, weak volume, and volatility elevated, tighten risk management: smaller position sizes, quicker profit-taking, and tighter stops.

5) Use utilities/TLT strength as a warning system.
If Utilities and TLT continue leading, assume risk appetite is deteriorating and reduce equity exposure further.

6) Keep metals as a hedge, not a core bet.
Gold holding up and making weekly highs suggests caution—maintain a hedge allocation to gold/miners in case equities weaken.

7) Bitcoin is neutral until it proves the bottom.
Only add crypto exposure if BTC clears $71k; otherwise treat the move as a countertrend bounce.

8) Prepare for seasonal weakness.
Into this weaker seasonal window, prioritize capital preservation: avoid chasing breakouts, rotate into leaders, and be ready to raise cash quickly if internals deteriorate.

 

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Keith's Weekly Market Analysis Video