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

Summary

Markets have remained broadly risk-on, with major indexes near all-time highs, strong new high/new low ratios, and all of the key sectors in bull phases, though the QQQ fund needs to hold its 50-day and semiconductors remain a key area to watch. However, mixed volume, gold’s breakout, weakness in Bitcoin, and the start of September seasonality add cautionary risk-off signals.

Risk-On

• Markets took a breather near or at new all-time highs in the S&P 500, though they sold off a bit on Friday on a hotter-than-expected inflation report. Its important to watch the QQQs to hold above their 50-day or swing low from the middle of August, as momentum has been failing in this leading index.
• The new high/new low ratio surged higher and appears to be positively stacked and sloped.
• Risk gauges remain strongly risk-on, though this reading did deteriorate slightly due to the strength seen in gold.
• On a short-term basis, value stocks seem to be holding up a bit better than growth stocks. However, both categories are in bullish phases, and as long as one of them doesn’t dip into a warning phase, this is still a risk-on indicator.
• Many of the major sectors appear to be in a bull phase. We are closely watching the semiconductors space to hold the 280 level and its 50-day moving average.
• Both emerging and more established foreign equities remain in a bull phase. If they can maintain their bull phases, the global equity market rally should continue.

Neutral

• Volume patterns improved a bit from last week, but they are still mixed overall, with about the same number of accumulation days as distribution days over the last two weeks.
• Market internals came off a little from last week's highs/breakouts, though they are still broadly neutral to positive.
• The moving average of stocks above key moving averages is positive across all-time frames for the IWM, mostly positive on the SPY, and skewing neutral on the QQQ.
• Agriculture equities continued their bullish action, closing at some of the highest levels seen since March, indicating some inflationary pressures. At best, this is neutral for the market.
• The yield curve steepened slightly.
• Sentiment readings perked up slightly into Friday’s sell-off, but it still remains near its lowest levels in a bear phase. However, the ratio of one-month volatility verses three-month volatility crossed its moving average from very overbought levels, which could be viewed as a risk-off indicator. 

Risk-Off

• Risk-off sectors like gold miners, energy, and materials moved up, while semiconductors, biotech, and retail were down. This is more of a risk-off skew.
• Gold finally broke out of its months-long trading range, breaking out to new all-time highs on an intra-day and closing basis, and outperforming the S&P 500 over the last couple weeks.
• Bitcoin has been looking a little shaky. After taking out its all-time high, it sold off below it’s 50-day moving average and closed on its recent lows on Friday.
• Markets are preparing to enter one of the worst seasonal periods in September.

For actionable trading ideas, please refer to the strategies discussed below.

1. Equities – Stay Long, Monitor Key Levels

• Bias: Maintain core long exposure to equities, as broad indexes (S&P, IWM, DIA) remain in bull phases and risk gauges are mostly signaling risk-on sentiment.
• Action: Hold positions in leading sectors (semiconductors, retail, transports, biotech), but keep an eye on QQQ at its 50-day and semiconductors at 280 as key support levels. If those levels break, trim exposure. Consider adding to value-oriented ETFs (e.g., VTV, IWD) given short-term relative strength.

2. Risk-On Expansion – Emerging/Foreign Equities

• Bias: The global rally appears to be intact as both emerging and developed foreign markets remain in bull phases.
• Action: Initiate or add to positions in EEM, VWO, or country-specific ETFs showing relative strength.
• Stop: Tighten stops just below 50-day moving averages to avoid drawdowns if risk-off sentiment accelerates.

3. Risk-Off Hedges

• Gold & commodities: Gold’s recent breakout to all-time highs is a risk-off warning. Add a partial gold hedge (such as GLD or GDX) to balance equity exposure, but size modestly (5%-10%) given its link to inflation.
• Bitcoin: The technical breakdown under the 50-day is bearish. Avoid new longs; short-term traders could consider a tactical short/hedge below recent lows with stops just above the 50-day.

4. Seasonality & Volatility

• September seasonality: September is historically weak month for equities. Reduce leverage, take partial profits into strength, and be prepared to rotate quickly if breakdowns are confirmed.
• Volatility: Volatility is still near its lows, providing favorable entry for hedging. Consider buying protective puts on QQQ or SPY while volatility premiums remain relatively cheap.

5. Risk Management

• Stops: Place stops under key index levels (QQQ 50-day, SPY August swing lows, SMH 280).
• Position sizing: Keep equity allocation overweight but layer in 10%-20% defensive hedges (gold, volatility, cash) to account for seasonality and risk-off signals.
• Review weekly: Reassess if risk gauges shift, particularly if more sectors dip into warning phases.

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