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Futures

Beginning with the S&P futures, which is the product I day trade and use for analysis: Price finally broke out from the continuation pattern. In summary, we saw a clean price trend up for all of April and May before price began to flag, which is simply a term used to outline the price consolidation in June and July (pictured below). These patterns resolve higher more often than not, and though it took awhile, that’s exactly what price did on August 3. I share daily futures insights on my Twitter.

You’ll often see price come back down and retest these structures to validate the breakout, but that would mean a 175+ point pullback from where we are now which would be some real whipsaw action. If this were to happen, those levels are labeled in the chart (EV = end value). I also added a potential support there around 7725. More below on futures.

Stocks

Following this strong price breakout at the index level, we’re seeing some clear evidence that traders are selectively reaching for risk again, but it’s fragmented.

First, a note on how we got here. The April-May period showed that growth factors and equity themes aligned: high beta, momentum, small caps, growth, even value stocks led the indexes while defensives lagged. That provided a broad, clean trend for whatever you trade and it was easier to be aggressive.

June and July though were much different. Overbought chips stocks and the AI growth/momentum trade more generally unwound and flows into energy, utilities, materials, and real estate stocks reflected defensive positioning. Those sectors are low volatility and that bucket was leading growth in June/July. That is the least exciting environment for swing trading stocks.

Today, we’re seeing cloud and software carry the Nasdaq, having led for six to seven weeks now. I got into NTAP on July 20 for cloud theme exposure and it’s starting to look good, up around $30 since entry. We also see multiweek leadership in online retail - which is why I liked GCT (before a 60% surge) and BABA - biotech, and aerospace.

There are signs too of early rotations from lagging to improving in growth/speculative names, specifically drones, robotics, space economy, quantum computing, optics (I’m in AXTI from 64ish), gold and metals, among others. I entered gold on Friday, having intended to open a trade in GDX at 83 but then chasing it higher as it gapped up. Probably not great, but I intend for it to be a medium term hold. In the space economy, I found an early turn in TRMB in late July and in drones, I got into ONDS last week. If interested, these ideas are shared free here.

Finally, the big one, semiconductors. It’s been a major theme in 2026, and they got washed out in July. Semiconductors are still lagging but improving. The charts of semi ETFs look similar: they’re recovering short-term moving averages, though it’s not necessarily fireworks.

The layer above

If we look at what the high beta group is doing as a whole, it has flipped from lagging to improving. These conditions can flip-flop from week to week, and so an additional layer I calculate is the spread (difference) between high beta and low volatility. This has decreased from -11.8 to -1.7 and if that can flip positive, I will be eager to get into full-sized swing positions again. So it’s selective pockets, not broad aggression like April-May.

The long bond (30Y) has been aggressively selling off and this has driven yields to its highest levels since 2007. High multiple names are priced on earnings that show up years from now. When you can get >5% risk-free, waiting gets expensive. But credit spreads remain ultra tight, so the stress still is not showing up there. It’s a condition to watch. I share regular updates on macro observations on my Twitter.

And now back to futures again. You can see in the chart above that there’s a flag forming, which is to be expected after a big breakout or move. But what’s especially encouraging here is that bulls held onto the highs, suggesting that the move was accepted and the pullback contained. Earnings have been a boon for the most part and as we get further into earnings season, early suggestions are that this may continue.

The two trend days on August 3 and 4 left a big pocket of one-sided buying from about 7543 up to 7724.5. This is where bulls were not only active but dominant. My main line in the sand for bulls this week is 7720-25, and any breakdown from there which isn’t quickly bid higher opens the door for chop.

Tests into this area which show strong 15-minute candles are spots where I would look to get long: 7725, 7715, 7683, 7655, 7638, 7621 could be specific spots to watch. The case for holding runners for big moves favors the upside in this environment, though there can be some extension down like we saw on August 5.

On June 17, when the Fed announced its latest interest rate decision and Warsh held his first press conference, S&P futures sellers kicked off the selling around 7591-93, a level that was defended by sellers four more times. The price rally from Q2 is now stalling.

Over the last couple of weeks, the MAGS ETF, which contains the magnificent seven megacap stocks, has outperformed the S&P after 5-6 weeks of underperformance, though within the context of a longer-term downtrend. The last time we saw it rally like this was early April, and the index responded well. This is an early signal of outperformance and there is room to run within the channel in the MAGS/SPY chart linked here.

A key difference between now and Q2 is the persistent pressure from the long bond. The 30Y is back over 5% which is, on its own, historically a speed bump where the index tends to grind or decline. In fact it’s almost exactly where it was on July 15, 2025.

Back then, credit spreads on the high yield corporate group hit 300bps, calm baseline with credit unambiguously supportive of risk assets. Basically, investors were not demanding large premiums to hold riskier assets. Today, the HYG OAS is at 272bps, which is even tighter and remains supportive of risk.

With S&P declining or stalling but MAGS coming to life, I think credit is the tiebreaker here: It points to consolidation, not breakdown. If the yield finds price acceptance and stays >5%, and HY OAS widens, and the MOVE starts to rise, then we may see a greater headwind for equities.

Also worth looking at the VIX here, which is over 16 today. At sub-18, the VIX remains in calm baseline and movement within the 14-18 band is noise. A transition from sub-18 to 18+ starts to change the picture. MAGS bouncing appears to be currently holding up the index, and there’s also plenty of selective strength like we’re seeing in biotech, fintech, cybersecurity.

Even with firm credit and strong breadth (stocks above 50 and 200 day moving average both over 59%), the index is struggling to break out from the consolidation pattern and the long bond is capping how hard the index can push.

The elements discussed here describe heavy consolidation near the highs, not a breakout and not a breakdown. These are more warning signs to watch rather than a sell signal. Credit moving would confirm a real shift towards risk-off.

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Index Futures & Technical Structure

A week ago, the technical story was that bulls had taken price into extended territory and cracks were beginning to show: 1) The trend had exhausted, 2) The MACD had reached its pinnacle and showed signs of waning momentum, and 3) Price was bumping against resistance from the expanding range technical structure in the chart. ES is down 3.9% over the last week as of Wednesday’s close, and the weekly MACD histogram has continued to compress after peaking, consistent with the pullback.

On the pictured below, ES remains inside a large expanding range (blue). The index rallied hard off the expanding-range lows from the April selloff and reached the upper boundary over 7600 before this week’s pullback. Price is now working through a bull flag or pullback structure within that move (orange), with this week’s action testing the lower side of that channel and closing Wednesday at the lows.

On watch: Flag support is at 7233 now and slides down to 7200 over the next week; resistance is 7575 now, moving down to 7541. Hold above that zone and this stays a healthy pullback inside the larger rally off the April lows. A break below 7200 breaks the flag and opens a deeper retrace inside the expanding range rather than a quick push back toward 7600.

Breadth & Leadership

Structural breadth (200-day) has been in decline for most of 2026, with the portion of stocks trading above their 200-day moving average putting in a series of lower highs since January. Over the last week, structural breadth was mostly flat from 52% to 52.5%. Last week we observed a steep pullback in the number of stocks trading above their 50-day moving average, from 60.8% to 49.6%; it is now at 49.9%. As mentioned a week ago, moves around 49% are common, but holding sub-50 for a week starts to tilt the intermediate read bearish. Intermediate breadth is tracing a path roughly similar to January 2026, topping out around 71-72% on April 21 and moving lower.

The S&P equal weight ETF (RSP), which strips out market cap weighting and provides a picture of how stocks are performing in absolute terms, declined by 1.3% this week vs a 3.8% decline in the S&P and a 6.2% decline in MAGS (magnificent seven megacap stocks). MAGS has been steadily in decline against RSP for the last month as megacaps that carried the index pulled back. As this shows, much of the weakness is still concentrated in megacaps as the average stock held up better.

On watch: Data from the last two weeks and last four weeks shows an important rotation that had already been underway: S&P low volatility stocks have shown the most relative strength against the S&P followed by strength in value stocks. Over this same period, there’s been underperformance by growth, momentum, high beta, and MAGS. At this time, there isn’t a sign that this defensive posturing by investors - the flight from higher risk to lower risk - has slowed. I am also watching to see whether intermediate breadth can buck the pattern from January and turn higher again.

Risk Sentiment & Positioning

Last week we noted that bearishness has run above its historical average for 17 consecutive weeks even with the index at highs, with the open question of whether bullish sentiment would finally catch up to price. Both AAII and NAAIM publish on Thursday, so neither is in this week’s numbers.

Bitcoin fell another 3.8% this week and remains the outlier on the risk curve, still consistent with the 2022-style bear market read we have flagged for weeks. ARKK fell 6.1% and the Renaissance IPO ETF fell 7%, with the SpaceX IPO on deck: pricing set for June 11 and trading expected to start Friday. NAAIM exposure as of 6/3 dropped from 98.4% to 86.8% against an 82% historical average, a meaningful pullback in active manager positioning from very elevated levels. Worth noting that NAAIM is moving to a subscription model in August, so this exposure data will not be publicly available much longer.

On watch: Updated AAII and NAAIM readings Thursday, and whether the SpaceX IPO pulls liquidity from the rest of the risk complex into the end of the week.

Credit & Bonds

The options-adjusted spreads in high yield and investment grade bonds remain in tight conditions at 278bps and 75bps respectively, up only marginally from 271bps and 74bps a week ago. That is still low perceived default risk for both riskier and stable corporates, and credit is not confirming the equity selloff as a stress event. The SHY/HYG ratio, which measures how short-term treasuries are performing against high yield as a gauge for flight-to-safety, has continued to move higher this week, but it is not in the danger zone yet.

The MOVE index, which is like the VIX but for the bond market, is at 73.9, up slightly from 73.6 last week. At this level MOVE is not stressed, though it continues to make higher lows across 2026 rather than being pinned at the lows. The MOVE/VIX ratio has fallen 27.4% as the VIX spiked and rates volatility did not keep pace, which fits equities leading the uncertainty this week rather than a bond-market-driven repricing.

On watch: 30Y yields remain just above the 5% level we have been watching, the same threshold that repeatedly tagged and backed off in 2025. I am watching for sustained 30Y acceptance above 5% alongside rising HY OAS (<280 is still ultra tight conditions, so >280 starts to look like a regime change) and a higher MOVE, which would be the combination that turns calm credit into something equities have to respect. Spreads and MOVE are not there yet.

VIX & Vol Structure

The VIX exploded higher on Friday by nearly 40%, transitioning out of the calm baseline regime from 14-18 into the transition/elevated regime from 18-22, and hitting stressed territory above 22 before closing Wednesday at 22.2. Realized volatility was previously very compressed as the market moved to all-time highs last week, and on Friday the daily range in ES was nearly triple the 30-day moving average of ATR, which had been running around 55 points prior to that session. Accordingly, 30-day realized volatility has moved up from 10.2% to 14% while at-the-money implied volatility from the options market rose from 14% to 22% at the spike and is now at 20.9%. The volatility risk premium went from 38% last week to as high as 71% earlier this week and is now at 49.3%, and premium skew (VIX vs ATM IV) decreased from 14% to 6%.

After the big range on Friday, Monday was quiet, but Tuesday brought a roughly 244-point range in ES that did not close far from Friday and Monday levels, and Wednesday added another ~130-point range with the close at the lows. Volatility appears to be playing catch-up rather than the pricing of a sustained crisis: realized volatility is rising into the new environment while the options market has already repriced, which is why the risk premium spiked to 71% and has since come back down. Premium skew coming in supports the same read, as the headline VIX index and ATM implied volatility converged rather than diverging further.

The VIX regime transition path is 1) VIX exits prior range and stays out for days, 2) the VVIX (volatility of the VIX itself) changes character, and 3) term structure flips from contango to backwardation, or vice versa. (When in contango, the spot VIX is lower than the long-dated VIX futures, and in backwardation, this is reversed). Where we are now: the VIX has remained elevated for several days, the VVIX has broken out from a two-month lull but hasn’t risen at the pace that VIX has, and the curve remains in contango with long-dated VIX futures at 22.9 against spot at 22.2. Backwardation would signal escalation; contango at ~22 is still normal.

On watch: the question going forward centers on whether the volatility regime settles in the transition/elevated band, moves higher into the stressed band at VIX above 22, or mean-reverts to calm. The VVIX/VIX ratio is at the lower end of the range it’s been in since the big gap higher on April 8 that we have referenced for weeks now, which is an early suggestion that the persistence of this pop in volatility could be contained. VVIX is currently at 108.2 and has reached 130 or higher in prior stress events (March/April/October 2025, March 2026). I am also watching whether the gap between IV and RV widens again while RV stays put or continues to catch up, and whether VIX holds above 22 after Wednesday’s close at the lows in ES.

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VIX & Volatility Structure

The VIX moved higher from 15.7 to 16.1 over the last week, but moves inside the 14-18 band are noise and what matters most is transitions out of it. At-the-money implied volatility, calculated using SPX options 30 days out, fell from 15.2 to 14, while realized volatility was unchanged at 10.2. This puts the IV/RV volatility risk premium at 37.3%, back inside of the normal band after a bump up to 49% a week ago. The seven-week downtrend in RV has stalled.

There is still no material change to the VVIX/VIX to report, but it remains near the higher end of the range it’s been in since the April 8 gap up.

On watch: I am still watching the volatility premium and whether the gap between IV and RV widens again while RV stays put. VIX vs. ATM IV skew widened this week, but prior weeks have bounced around so I’m not treating that as confirmed.

Credit, Bonds, & Yields

The options-adjusted spreads in high yield and investment grade bonds remain in tight conditions, unchanged at 271bps and 74bps respectively. This represents low perceived default risk for both riskier and stable corporates, and therefore a healthy environment for corporate credit. The SHY/HYG ratio, which measures how short-term treasuries are performing against the high yield group as a gauge for flight-to-safety, is stirring again and put in a higher low on Friday. You can see the correlation between this ratio and the index at this link.

The MOVE index, which is like the VIX but for the bond market, moved up slightly from 69.7 to 73.6. At this level, the MOVE is not stressed but it is making higher lows across 2026 rather than being pinned at the lows. The MOVE/VIX ratio flagged last week has moved higher by about 1.6% and is sitting 6.7% beneath this year’s highs. It remains on the radar but there’s still not a convincing break one way or another.

On watch: We have watched 30Y yields flirt with the 5% level a number of times since March of this year. This is similar to what we saw in 2025 when the long bond repeatedly tags this pain threshold, backs off, and stocks get some room again. One key difference this time around is that the current leg up in the S&P is steeper and more compressed into highs, whereas last year the HY OAS peaked at 457bps, which is high stress. My base case would be more stall at 5% with a grind in the index. What I am watching for invalidation to the base case is sustained 30Y acceptance >5% alongside rising OAS and MOVE.

Breadth & Leadership

The share of stocks trading above their 200-day moving average (structural breadth) fell from 56.2% to 52%, still bullish bias. The share of stocks trading above their 50-day moving average (intermediate breadth) is a bit messier with a move from 60.8% to 49.6%. Intermediate breadth regularly trades around this line, so it’s not a regime change right now.

RSP rose by .85% week over week while MAGS fell by 2.7% and SPY rose .5%. Two weeks ago we detected that the MAGS/RSP ratio had begun to reverse the 4w/12w trends higher with a 1.4% move lower. This week we saw a meaningful acceleration of this reversal with the ratio moving 3.5% lower.

On watch: Structural breadth has been falling throughout 2026, hitting 66.7% in January and then recording a series of lower highs since late April, pictured here. MAGS has done a lot of the work in carrying the index until recently and what remains to be seen now is whether or not the selloff in megacaps spreads to the average stock.

Risk Sentiment & Positioning

According to the AAII poll of individual investors, the share of respondents that were bullish increased from 35.6% to 36.3% against a 37.5% historical average while the share that were bearish decreased from 41.9% to 37%, the historical average is 31%. The neutral share was 26.7%.

Among equities, sentiment gauges IPO and ARKK were up 1.5% and .7% respectively. Like a week ago, bitcoin continues to be the outlier with a sharp 14% move lower. We observed two weeks ago that “This period looks a lot like 2022 when bitcoin was in a bear market cycle...” No change to that read as bitcoin has lost all moving averages that I watch (200, 50, and 10 day sma; 21 day ema.)

On watch: AAII polling represents investors’ expectations for the next six months. Bearishness has run above its historical average for 17 consecutive weeks now, a period which includes the February-March selloff and the rally off of those lows. Bullishness was >40% for eight out of the 10 weeks prior to that selloff, so it’s interesting that what feels like retail-driven narrative in the headlines isn’t showing up in the poll yet. After an extended rally, bulls are still not in euphoria and if the surveys catch back up with bulls >40% and bears towards 31% or lower while the index holds the highs, that’s when I’d be more likely to treat retail as overheated.

Index Futures & Technical Structure

ES bounced along the expanding range level shared in the chart last week for much of the week before testing the cash session support at 7565 on Wednesday, a level sent out in the note on Sunday. Buyers initially held the line there before failing, which effectively ends the post-gap trend higher. Buyers must now close the week out at >7605 to recover this steep trend higher, however this looks increasingly unlikely with futures trading slightly lower premarket Thursday.

The weekly MACD line has finally reached levels seen during the July rally, which will likely be its peak for this cycle. The histogram has begun to compress after six straight weeks of expansion, which you can see in the chart below. Neither of these provides a sell signal though as higher sustained prices will continue to indicate bullish momentum. However, with a rally as steep as the one we’ve seen since March, it’s unsurprising to see it begin to slow.

Stochastics remain overbought with little to no change, though this is also not a sell signal as overbought conditions can last for weeks or months.

On watch: We knew that the steep trend would eventually exhaust and what matters right now is 1) Whether or not bulls can recover it, or 2) What emerges in its place. I will share my latest chart on the Notes feature of Substack or perhaps in a regular post.

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VIX & Volatility Structure

The VIX fell from 17 to 15.7 over the last week, a calm baseline band from 14-18 in which daily moves inside are mostly noise. At-the-money implied volatility rose from 14 to 15.2 while 30-day realized volatility dropped slightly from 10.8 to 10.2 with a seven-week downtrend.

On watch: The only thing that stands out is that implied volatility went up by 1.2 points while realized volatility went down, so the risk premium went up from 29.9% to 49%. The risk premium points to the gap between what the options market expects volatility to be vs what it actually was. However, it’s not uncommon for it to hit 50% and the thing to watch will be if it continues to actively widen while RV stays in place or declines. No material change in VVIX/VIX ratio this week, still on the radar.

Credit, Bonds, & Yields

The high yield options-adjusted spread (OAS) and investment grade OAS represent the price of lending to riskier/lower rated companies and investment grade companies, respectively. Both figures are in tight conditions: the HY OAS fell from 286bps to 271bps while the IG OAS fell from 75bps to 74bps. Last week’s SHY/HYG read showed that the flight-to-safety trade had begun to fade and the ratio has continued lower this week as the stress spike faded.

We can take the “calm credit” narrative one level deeper by looking at the MOVE index, which is the rates market equivalent of the VIX and measures expected volatility in Treasuries. MOVE has compressed from 79.7 to 69.7 alongside compression in spreads and the VIX, which completes the full calm credit picture.

On watch: The MOVE/VIX ratio spiked 10 days ago alongside yields, as the MOVE went higher and the VIX lower. Previous newsletters noted that 30Y yields >5% have, at times, coincided with equity weakness. But yields have come down again and much of the ratio spike has now retraced. This ratio is on watch for turning higher, as it can reprice uncertainty before equities or credit spreads.

Breadth & Leadership

The share of stocks trading above their 200-day moving average (structural breadth) rose from 52.3% to 56.2%. The share of stocks trading above their 50-day moving average (intermediate breadth) rose from 55.2% to 60.8%. More stocks are participating in the rally compared to a week ago.

The RSP rose ~2.6% from a week ago, also a sign of broadening participation. Whereas the index itself can be pulled higher by megacaps, the RSP strips out the influence of megacaps and weights index components equally, giving a view of the index in absolute terms. MAGS (magnificent seven megacaps) rose by 2.3%. The equal weighted slightly outperforming megacaps supports the broadening thesis.

On watch: Nothing pressing.

Risk Sentiment & Positioning

The AAII survey of individual investors showed the share of bulls increase from 31.7% to 35.6% over the last week against the 37.5% historical average, demonstrating that sentiment is not overheated. The share of respondents that were bearish declined from 43.6% a week ago to 41.9%, well above the historical average of 31%. Neutrals declined from 24.7% to 22.6%. It’s a high bearish read but this survey cuts off on Wednesday at 11:59PM EST, so it will be interesting to see if sentiment improves further following the up day on Thursday and small rise in futures at time of send-out premarket on Friday.

Bitcoin, ARKK, and IPO give us three flavors of risk appetite: bitcoin is untethered to cash flows and represents pure liquidity; ARKK is speculative equity growth and rate-sensitive; and IPO is the newest-issue cohort that bids up when conditions are risk-on and is abandoned first when they are not. These three are mapped on the chart below. Bitcoin is down 5.6% after meeting resistance at the 200-day moving average and support at the 50-day failed; ARKK is up ~7.6% and IPO is up ~8.3%. This divergence with ARKK and IPO up sharply and bitcoin down is likely explained more by drivers specific to crypto/bitcoin (ETF flows, treasury demand) than any sign of risk-off conditions. ARKK continues to hold onto gains from this rally, but within the context of a broad downtrend since October as inflationary conditions pick up and hopes for rate cuts are nearly gone. IPO is the standout here though, hitting all-time highs as investors look further down the curve for speculative risk.

On watch: The NAAIM Exposure Index, which represents US equity market exposure reported by active investment manager members, exploded higher from 82% average exposure last week to 98.4% as of May 27th, compared to 82% Q1 average. This number can run near or at max exposure for weeks at a time before eventually cooling off some. This is in clear support for equity risk-on and anything above 80% tends to coincide with stable index prices.

Index & Technical Analysis

The index continues higher within the 17-year channel and is neither stressed nor stretched; I suggest taking a look at the chart here if you missed it because it helps to zoom out for context. In the intermediate term, price discovery makes simple technical analysis a bit more difficult. In the chart linked here, you can see that the two structures I am watching are 1) Expanding range, and 2) Trend channel (redrawn), cash session only, from the gap up on April 8.

The weekly MACD has reached its sixth consecutive week of bullish expansion in the histogram, which shows the distance between the short and long term trend, at the highest level since July of 2025. The MACD line itself continues to move towards the level achieved in July of last year with room to go.

Stochastics continue to show overbought conditions, cooling slightly from 96 to 95.6, and can remain overbought for weeks or months.

On watch: When will bulls slow down? To keep price trending at the same trajectory over the next week, bulls need to hold supports at 7506 and rising to 7587.

Treasury/HY read followed through on last week’s setup into the resistance band and then backed off, in keeping with what we often saw over the last year, and well below the April spike. Calm credit and a relaxed volatility premium are still supportive of risk-on label, but retail bearishness and the broken cash-session trendline appeared.

VIX & Vol Structure

The VIX remains in calm territory at 17, a solid move lower from 17.9 a week ago. We saw implied volatility, which is calculated using at-the-money SPX options, drop from 17 to 14 (at time of writing on May 21) while realized volatility moved higher from 10 to 10.8. After three weeks of expansion, the volatility premium contracted this week from 70% to 29.9% vs the 35-40% norm, which implies that the volatility market has relaxed significantly.

On watch: From Monday-Wednesday this week, the spot VIX moved lower while the VVIX (volatility of the VIX itself) moved higher, with the ratio climbing from 5.1 to 5.6. For the most part, we see these move together and as of writing (May 21), the brief divergence has faded, though the ratio remains higher at 5.4 than a week ago and so while not an active divergence, worth keeping on the radar.

Credit & Bonds

The high yield option-adjusted spread (HY OAS) is at 286bps compared to 282bps a week ago, minimal drift that keeps the spread within calm baseline and still supportive of risk, but a small step towards the likelier wider ranges. Last week 30Y yields moved over 5%, and they moved even higher over this past week to 5.1% while the 10Y moved up from 4.47% to 4.6%. The MOVE, which reflects bond market volatility, is up 11 points to 81.5. This shows that most of the action is in rates and not in credit.

Last week’s newsletter flagged that Treasuries were moving higher against the high yield group, though without a major flight-to-safety trade yet. The chart of the week below shows the SHY/HYG ratio in the upper portion with the S&P overlaid below. This ratio compares short-term treasuries (safe bets) vs the riskier basket of high yield corporate bonds. We’ve seen over the past year that when the ratio approaches the resistance band marked on the chart we see dips in the index, with the ratio trending higher slowly, often gapping up, running into that resistance, and then backing off again. After the stress spike in April, the chart shows that the Treasury vs HY this month is not a repeat of the March-April variety and is actively fading.

On watch: The 30Y at >5% has been an equity headwind to varying degrees and remains on watch. In the SHY/HYG chart, the move lower from the resistance band has just broken down beneath the uptrend marked in green, so the flight-to-safety trade appears to be waning.

Breadth & Leadership

The share of stocks trading above their 200-day moving average (structural breadth) fell from 52.8% to 52.3%. The share of stocks trading above their 50-day moving average (intermediate breadth) rose from 54.7% to 55.2%. Sustained divergence between high prices and declining breadth, as well as structural breadth falling below the bullish-bias 50% mark, were highlighted flags a week ago. Both of the breadth levels dipped below 50% on Tuesday before sharp rebounds on Wednesday, indicating that breadth decline appears to be more of a quick bottoming out rather than a sustained issue.

RSP, which equal weights market cap of stocks in the S&P, fell less than half a percent since last week, so not much change in stock participation in absolute terms, but still fewer than we saw a couple of weeks ago. Over 4w and 12w, the RSP/SPY trends are still falling (-4.2% / -6.8%), MAGS/RSP is still rising (+6.4% / +10.5%), and IWM/SPY is falling (-3.4% / -1.6%), indicative of a concentrated, cap-weight-led market and not a clean, broad bull.

On watch: The MAGS/RSP ratio fell 1.4% week over week, which tells us that some of the magnificent seven dominance is in decline against the equal weight S&P, perhaps an early sign of broadening stock participation in the rally if it sustains. This is only a 1-week counter move, with the 4w and 12w trends pointing up.

Risk Sentiment & Positioning

AAII polls of individual investors showed rising bearishness for the second straight week, from 36.6% a week ago to 43.6% this week, well above the 31% historical average. The percent of bulls contracted accordingly from 39.3% to 31.7%, well below the historical average of 37.5%. The remaining 24.7% were neutral, roughly in line with 24.1% a week ago. We saw this sentiment appear in the Friday-Tuesday selling, which saw the largest pullback since this rally began in late March.

I track bitcoin, ARKK, and the IPO ETF as risk appetite and sentiment proxies. Bitcoin is down about 4.5% week over week, ARKK is down 3.5%, and IPO is up 1.4%. Bitcoin found resistance at the 200-day moving average again late last week, having traded below this key reclaim since late November. This period looks a lot like 2022 when bitcoin was in a bear market cycle, with the major difference being that the S&P was declining alongside it in 2022. It is currently finding some intermediate support at the 50-day, and could stand to base longer while the down sloping 200-day levels out a bit. ARKK is again down alongside breadth while IPO’s strength is explained by outperformance in ALAB and ARM.

On watch: Though we see retail-level fear, calm HY and VIX mean this is survey fear ahead of any confirmation. Next reading will be useful in seeing whether bearish sentiment fades or credit/volatility follow.

Index & Technical Structure

Bulls were unable to hold 7437 at the close last week, thus ending the cash-session-only uptrend that began April 8 and ran through May 15. Much of what we’re seeing right now though is live geometry and trajectory exhaustion: A steep trend slowed down and some retracement from overbought conditions occurred. Even with a recovery in prices from this recent dip, bulls would need to recover 7570, or another 90 points or so.

The MACD continues to show that shorter-term trend strength is pulling away from the longer-term average as shown by the growing histogram for the fifth straight week, even as price dipped. The slower momentum read also still favors bulls in spite of the recent cash-session trendline breaking.

Stochastics remain in overbought territory, but cooled off slightly from 98 to 96. I mentioned last week that overbought is more of a reflection of trend strength rather than mean reversion, and the stochastic reading could stay in overbought territory for weeks or longer.

On watch: Bulls made a push this week and their strength can be gauged by whether or not they reclaim 7570 or perhaps this pullback forms a higher low that we can use to redraw the trend.

A note for the futures traders on this list: this is the macro foundation. A paid Futures Desk section with analysis and trade breakdowns is planned.

Market Lens remains free.

VIX & Volatility Structure

The VIX has moved up this week from 17.2 at close Friday to 17.9 at the time of this writing, still inside the calm regime. But this doesn’t always tell the whole story and to get a more complete picture, I compare the implied volatility being priced in the SPX options market against what’s actually happening. The at-the-money (ATM) implied volatility (IV) is 17 while the 21-day realized volatility (RV) is at 10, which yields a 70% premium. The premium has expanded from 36% to 48% to 70% over the last few weeks, compared with the historical norm of 35-40%. This would indicate a widening of the volatility premium that the VIX itself isn’t reflecting. IV of 17 is a notable one week move from Friday (15.6), but this is only a one-week reversal, not a trend. This is consistent with either reading: a maturing calm regime or the early stage of the options market pricing forward risk.

On watch: If IV continues to climb while RV stays compressed, this would be an active widening of the volatility premium and could suggest a change in the volatility landscape ahead. This may not always be priced into the spot VIX that we see since ATM options give a clearer read on volatility than the VIX does, which is calculated across the whole SPX complex.

Credit & Bonds

The high yield option-adjusted spread (HY OAS) is a measure that compares higher risk corporate bonds against the Treasury curve. The HY OAS has ticked modestly higher over the last week from 275bps to 282bps, roughly in line with the second half of April but moving from what the Market Lens considers the ultra tight band (<280bps) to the calm baseline band (280-330). At 282, there is little room left to compress and the likelier path remains wider moves. With low OAS, we still have a setup for a repricing on any potential catalyst, of which there are many.

While high-yield corporate bonds are down on the week, they are still outperforming their investment grade counterparts, reflecting ongoing risk-on conditions. Treasuries continue their upward trajectory vs the HY group, but there is no signal that there is a major bid in the flight-to-safety trade right now. The 10 year yield is at 4.470%, up from 4.395%, which drove this ratio up.

On watch: 30-year Treasury yields moved over 5% on Tuesday, the highest reading since mid-2025. This level has acted as a pressure point for equities to varying degrees in recent years: In October 2023 this led a pullback low by several weeks and in early 2025, the first touch of 5% led the low by several months. More recently, the pullback low in late March came with the 30Y peaking at 4.998%, close but not exact.

Breadth & Leadership

Bearish divergence detected in breadth: The share of stocks trading above their 200-day moving average (structural breadth) fell from 57.3% a week ago to 52.8% today. The share of stocks trading above their 50-day moving average (intermediate breadth) fell from 65.9% to 54.7%. A decline in breadth while the index hits all-time highs signals that broad participation actively contracted over the last week.

RSP, which equal weights market cap of stocks in the S&P, has pulled back over 1% over the last week from all-time highs, so fewer stocks are participating in absolute terms. The MAGS/RSP ratio saw a very sharp move higher on Wednesday, an acceleration of a multiweek pattern. RSP/SPY ratio also made a sharp move lower on Wednesday, similarly an acceleration of a multiweek pattern which suggests that index-level gains are being fueled even more by megacaps.

On watch: Structural breadth breaking below 50% (psychological threshold) or seeing breadth continue to decline while the index holds steady or goes higher would widen this divergence.

Risk Sentiment & Positioning

AAII polls of individual investors showed that 39.3% were bullish, up from 38.3% a week prior and above the historical average of 37.5%. However, 36.6% were bearish compared with 33% a week prior, well above the historical average of 31%. Bears moved sharply higher while neutrals compressed from 28.7% to 24.1%.

I track bitcoin, ARKK, and the IPO ETF as risk appetite and sentiment proxies. Bitcoin is down about 1.8% week over week at time of writing, ARKK down about 1.8%, and IPO down 3.9%. ARKK’s decline makes sense within the context of breadth compressing, while bitcoin and IPO represent a divergence from the S&P at all-time highs.

Index & Technical Structure

I do most of my work in the S&P index futures, which are in price discovery mode at all-time highs. In the chart of the week below, I frame the trend after the gap up on April 8th using the cash session (regular trading hours 9:30-4:00 EST, excluding overnight session), which coincides with the recovery of the 50- and 200-day moving averages. The bull case here would center on holding 7415 on Thursday and 7437 through week-end, which are the channel supports on Thursday and Friday.

You don’t need a MACD chart to know that momentum resides with the bulls, but it’s notable that the weekly MACD line is still below levels reached during the bull cycle in the second half of 2025. This can continue to improve even though the trend trajectory may be difficult to keep up; MACD doesn’t require sharp price increases, just sustained high prices. The histogram (gap between MACD and its signal line) is now in its fourth week of positive acceleration, demonstrating the sustained trend.

Stochastics are overbought at about 98 for the second straight week, a confirmation of trend strength rather than a mean reversion indicator. The K and D line are “pinching” (coming together), but a crossover here in the context of this trend is not a sell signal.

On watch: Price momentum remains strong while internals discussed above are deteriorating. Losing trend supports is the initial sign that the trend could pause. The more meaningful level could be 7428: a break there below last week’s value area highs would mean Wednesday’s breakout that drove the index to new all-time highs is being rejected and price is back inside of last week’s accepted range.