Stage 2 Is Back. Don't Get Comfortable Yet.
Semiconductors are carrying the market. Breadth is fading. Hormuz is unresolved. So let's stay patient.
OIL, HORMUZ, AND THE MACRO PICTURE
Oil remains elevated. The conflict and the Hormuz blockade are unresolved.
This is the most important macro variable right now. The longer it drags, the bigger the drag on the global economy — and on markets.
Financial conditions have improved and the market has bounced. That’s real. But this is not the moment to throw caution out the window. We need Hormuz resolved and traffic flowing again before trusting this recovery fully.
INDEX AND SECTORS
The S&P 500 is back in Stage 2 — but read the fine print.
The index closed at 7,165, above all key weekly moving averages. The 30-week average is below price and rising again. The primary trend has repaired. That’s the good news.
Now the caveats. Volume came in below the 10-week average. Breadth fell while the index rose. This is not a broad, clean, early-stage bull move. It’s a narrow rally carried by leadership pockets — semiconductors above all.
What the tape says
Bullish evidence
Price reclaimed the 10, 20, 30, and 40-week averages
Price broke above old 7,000–7,020 resistance
MACD has turned positive
RSI is strong at ~64 — not extreme yet
Warning signs
The move is already extended from the 30-week average
Breakout volume was weak
Breadth dropped to 53.45% (–3.27 points) as the index rose
Equal-weight S&P 500 was soft — the average stock did not confirm
Sectors: where leadership lives
The clearest read on sentiment: SPHB — high beta — is the strongest sector-style ETF in the table. High beta leading low volatility is not defensive behavior. The market is in risk-on mode.
Technology / Semiconductors — the main engine. XLK is strong. The semiconductor move is powerful. It’s also getting stretched. Don’t chase extended names here. Wait for pullbacks or tight consolidations.
Energy — still solid over 3 and 6 months, but the 1-month number is soft. The trend is no longer clean. Good individual stocks may work, but the sector is headline-sensitive. Stay selective.
Materials, Industrials, Real Estate — constructive. They suggest the rally isn’t only tech. Mixed this week though — they need follow-through to confirm.
Defensives — consumer staples, utilities, and low-vol are positive but not leading. Good. The market isn’t hiding in safety.
Weak spots — Financials and healthcare are the biggest concerns. XLF carries a negative weighted score. XLV is also lagging. A healthy bull market doesn’t stay comfortable with major sectors acting this poorly for long.
Breadth: the nuance that matters
The breadth environment is still Positive — but it weakened this week. That’s worth watching.
The market can continue to rise with breadth around 53%. But if the S&P 500 pushes higher while breadth keeps falling, that’s a bearish divergence. I want to see breadth expand next week. Simple as that.
Bottom line: The tape has improved. The S&P 500 is back above resistance, back in Stage 2. But the rally is narrow and semiconductor-heavy. My call: cautiously bullish, with a high probability of a short-term pullback.
PORTFOLIOS
10X Momentum Portfolio
My SNDX stop loss was triggered last week. Annoying — I still believe in the stock’s upside. But the process is the process. No exceptions.
My buy stop on AVGO was also triggered. I now carry two full positions there.
The portfolio is up more than 200% (44% annualized). AMD is up nearly 60% in under a month. Stop loss levels have been updated — full details below.
This week: no new trades. I’m not forcing anything. Nothing came across that was convincing enough to act on.
That’s a wrap for the week. Let’s see what Monday brings.
Important: This is not investment advice. Please consult a licensed financial advisor before making any investment decisions. AI tools used for editing.