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WEEKLY REGIME VERDICT
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BULLISH CAUTION
Posture: Selective — full size on what qualifies, nothing forced
Held from last week. But for a different reason.
Last week the caution came from repair still in progress. This
week almost everything has repaired — index structure, breadth,
inflation data. One thing has not, and the protocol does not
grade on effort.
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THE INDEX PICTURE
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SPY — $776.34
Closed Friday −0.20% after a week of record highs. The full
Stage 2 stack is intact and correctly ordered:
price 776.34 > 8 EMA 770.99 > 20 SMA 756.20 > 50 SMA 748.93 >
200 SMA 705.46
This is textbook. No ambiguity, no interpretation required.
QQQ — $731.07
Price is above the 8 EMA (721.61) and above the 50 SMA (712.95).
But the 20 SMA sits at 704.13 — still below the 50 SMA.
That inversion is the leftover of the early-August drawdown to
660. It is closing fast: the 20 SMA is rising as the dip rolls
out of the window. But today it has not closed.
The protocol requires both SPX and NDX in strict Stage 2 —
price above 20 above 50 above 200 — before full deployment is
authorised. QQQ fails that test by roughly nine points.
IWN — $227.43
Small-cap value closed +0.29% with every average correctly
stacked beneath price. Participation at the low end of the
market cap range is confirmed.
VIX — 14.26
A new 2026 low, below every moving average on the panel.
Read this carefully. A VIX at 14 does not mean the market is
safe. It means almost nobody is paying for protection. That is
the condition in which an unexpected headline moves further
and faster than it otherwise would — and the Middle East file
is still open.
Key levels to watch:
→ SPY support: $770.99 (8 EMA), then $756.20 (20 SMA)
→ SPY resistance: none — at all-time highs
→ QQQ support: $721.61 (8 EMA), then $712.95 (50 SMA)
→ QQQ resistance: $740 (June high)
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BREADTH CHECK
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Reference levels, identical on every report:
above 70 extended · 40–70 normal · below 40 contracting ·
below 25 washed out
S&P 500 (large cap)
→ Above 200-day (S5TH): 72.76 — extended
→ Above 50-day (S5FI): 69.38 — top of normal range
Broad US market
→ Above 200-day (MMTH): 61.25 — normal
→ Above 50-day (MMFI): 62.59 — normal
→ Above 20-day (MMTW): 65.47 — normal
→ New highs / new lows (MAHN/MALN): 3.53
Concentration gap
→ 200-day horizon: +11.51 points
→ 50-day horizon: +6.79 points
Verdict: Healthy — and materially better than two weeks ago.
Two weeks ago the short-term broad measure was at 45, below the
50 line, while the S&P equivalent sat at 62. That gap was the
reason for the downgrade to NEUTRAL — DEFENSIVE at the start of
August.
That reading has now inverted. Broad short-term participation is
at 65.47. The intermediate concentration gap has compressed from
roughly ten points to under seven. Capital is no longer parked
exclusively at the top of the market.
The 200-day gap is still double digits, and the S&P long-term
measure is above 70. Neither is a sell signal. Both are reasons
not to treat this as a fresh entry point for the index itself.
New highs still outnumber new lows better than three to one.
Leadership is expanding, not contracting.
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SECTOR ROTATION
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Rotation is context for where to look first. It is never a
filter. A stock qualifies or fails on its own six-indicator
alignment regardless of what its sector is doing.
Weekly ranking — relative strength vs SPY, and whether that
strength is accelerating or decelerating:
ACCELERATING (below SPY, gaining)
1. XME Metals & Mining RS 0.910 slope +329 ADX_D HIGH
2. XLK Technology RS 0.968 slope +113 ADX_W HIGH
3. XLY Cons. Discretionary RS 0.952 slope +76
4. QQQ Nasdaq 100 RS 0.963 slope +63
5. XLC Comm. Services RS 0.951 slope +40
DECELERATING (above SPY, losing momentum)
6. XLF Financials RS 1.100 slope −82
7. XLV Health Care RS 1.093 slope −84
8. XLE Energy RS 1.077 slope −110
9. XLI Industrials RS 1.050 slope −88
10. XLP Cons. Staples RS 1.016 slope −116
11. XLRE Real Estate RS 1.009 slope −238
12. XLB Materials RS 1.002 slope −63
LAGGING AND FALLING
13. XLU Utilities RS 0.976 slope −336
Not one sector is both above SPY and accelerating. That is a
handoff in progress, not a stable leadership regime. The defensive
and value complex still holds the absolute lead but is bleeding
momentum in every case. Growth is underneath SPY on the weekly
window and climbing hard.
HUNT ORDER FOR THE WEEK:
→ First: XME and XLK — the only two names combining strong
acceleration with confirmed trend strength (ADX HIGH)
→ Second: XLY and QQQ constituents
→ Deprioritise: XLU, XLRE, XLP
Again — this is search order. Not permission.
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MACRO — WHAT LAST WEEK DELIVERED
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Three inflation and consumption prints, all supportive.
July CPI (Wed): +0.1% monthly, 3.4% annual, down from 3.5%.
Core +0.2% monthly, 2.5% annual. Both in line with consensus.
July PPI (Thu): flat on the month against a +0.2% expectation.
Core +0.2% against +0.3% expected. Annual headline 4.7%.
July retail sales (Fri): −0.6% against a +0.2% expectation. The
weak spot in an otherwise clean week, though lower gasoline and
soft car sales explain much of it.
Fed funds remain at 3.50%–3.75%. The July 28–29 meeting held on a
9–3 vote, with three officials dissenting in favour of higher
rates — Chair Warsh called it a “good family fight.” Market odds
of a September hike fell after CPI, with expectations pushed
toward October or December.
The 10-year sits at 4.692%, above its own 20-day average and in
an uptrend since April. Direction matters more than level here,
and the direction is against momentum equities.
Geopolitics remains the open variable. There is still no formal
US–Iran ceasefire, Strait of Hormuz shipping is below pre-conflict
levels, and oil remains headline-sensitive after peaking near $126
in the spring.
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MACRO FLAGS — WEEK AHEAD
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→ FOMC Minutes: Wednesday 2:00pm ET — the July meeting had the
first three-way same-direction dissent since 2016. These
minutes carry more weight than usual. Watch how close the
committee came to hiking.
→ Retail earnings wall: Home Depot Tuesday · Target, Lowe’s,
TJX Wednesday · Walmart, Ross Stores Thursday. Any Consumer
Discretionary or Staples name on your list has binary risk
on its report date.
→ Housing and production data: Tuesday brings housing starts,
industrial production and import prices. Thursday brings
claims, Philly Fed and leading indicators.
→ Monthly options expiry: Friday 21 August. Expect liquidity
distortion and unreliable volume readings into the close.
Calendar note: the FOMC minutes land Wednesday afternoon. An
order armed Tuesday evening fills Wednesday morning and meets
the event on day one of the trade. That is the arming evening
to skip. Monday and Wednesday evenings are clean.
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VERDICT RATIONALE
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Almost every input improved this week. Inflation cooled at both
the consumer and producer level. Breadth broadened where it had
been narrowing. SPY sits at all-time highs with a perfectly
ordered moving average stack. Small caps participated.
And the verdict does not move, because the protocol says both
indices must be in strict Stage 2 before full deployment, and
QQQ’s 20-day average is still below its 50-day.
That is the whole argument. Not a feeling about valuations, not
a view on the Fed. One measurable condition, unmet by nine
points.
This is what a mechanical framework buys you. It removes the
temptation to upgrade posture because the tape feels good, and
it gives you a specific, dated, observable trigger instead.
What upgrades this to BULLISH CLEAR:
→ QQQ 20 SMA closes back above the 50 SMA — likely within one
to two weeks at current rate, as the early-August dip rolls
out of the averaging window
What invalidates this verdict:
→ SPY closes below its 20 SMA at 756.20
→ Broad short-term breadth (MMTW) falls back under 50
→ US10Y breaks decisively above 4.75% with equity confirmation
→ A Middle East supply headline moves oil sharply higher — with
the VIX at 14, there is no cushion priced in
Until then: selective. Full size on setups that clear every
filter. Nothing forced to fill a slot.
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Trade Tight · Think in R · Focus on Process
— Radu
KISS Trading
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⚠️ Educational only. Not financial advice. Always DYOR.