Regime Check — Where Are We Now?
The tape is cooling fast — breadth is contracting hard off yesterday’s blowout, and with SPY/QQQ/IWM index levels showing data unavailable, we’re steering by breadth and sector internals alone.
- Breadth contracting sharply: % Above 20 SMA cratered to 54% from 105% yesterday (-51pp), and Bull 4% halved to 151 from 320. That’s a big one-day cooldown in short-term participation.
- Longer-term still intact: % Above 40 SMA slipped only modestly to 61.83% from 64.22% (-2.4pp). Sentiment 4% reads Bullish but the 40SMA sentiment is Neutral — momentum fading, not broken.
- Character: This has the feel of a digestion/reversal day — short-term froth flushing while the intermediate trend holds. Bull 9M at 27 vs Bear 9M 10 says leadership persists underneath.
Strategy Signals — Continuation, Reversal & SIP
- Strongest continuation (2LYNCH): AVLN $38.54 +5.4% (Medical) leads the 119-name continuation list, with DKNG $26.41 +3.9% close behind. Note the caveat: RVOL is light (AVLN 0.8, DKNG 0.5) — these are moving without heavy conviction volume.
- Strongest reversal setup: VCX $33.81 down -12.2% on RVOL 2.8 tops the bullish-reversal screen — a washout candidate. TKNO $7.16 (-2.9%, RVOL 2.5) and BBIO $80.08 (-1.4%, RVOL 1.9) round out the elevated-volume flush names to watch for a snap-back.
- SIP leaders mixed: Energy is the standout — VLO $343.05 live on CNBC, up 4.27 from open, sitting just 3.65% off its 52-week high. But the earnings tape is heavy: GLOB $41.03 flagged guidance cut (sentiment -2), DTST and NXXT both -2 on weak results. Selectivity matters.
- Most relevant action code — PLASTICS (Sector Winners): Communication Services RSPC ripped to 2.33, a 100th-percentile reading and rising, while Energy RSPG hit 2.16 (95th pct, +1.61 today). Play strength where it’s confirmed, not the broad tape.
Closing Playbook — What To Do Now
- CLOSE / trim candidates: Anything in Technology showing weakness — RSPT sits at -0.38, flat and the laggard sector today. Names on the reversal list turning down on RVOL >2 (VCX, YSS -5.1%, SMMT -4.0%) are telling you distribution is active; tighten stops or exit into the bell rather than hold hope.
- ENTER only on confirmation: With breadth thinning, use CRT — Controlled Risk Taking. If Energy strength holds, VLO and continuation name FANG $202.92 (+1.7%, INST) are the cleaner adds. Demand a real volume close before committing — light-RVOL breakouts fail in contracting breadth.
- Key level watch: Index levels are unavailable, so lean on breadth as your gauge. If % Above 20 SMA stabilizes above 50% into the close, today reads as healthy digestion; a break below 50% signals the flush has more room and argues for defense overnight.
Tomorrow’s Early Look
- Catalyst watch: The earnings tape stays busy — Globant’s guidance cut and multiple -2 sentiment reports (DTST, NXXT, GLOB) show the market punishing soft outlooks. Watch how these settle after-hours for read-through into tomorrow’s open.
- Setup forming: Energy is the highest-conviction carry-over — VLO $343.05 pressing toward its 52-week high, with FANG $202.92 as a confirming continuation. A hold of these levels sets up follow-through if crude/energy strength persists.
- Regime outlook: Today’s -51pp collapse in short-term breadth demands respect — reduce size and be selective tomorrow. The intact 40 SMA (61.83%) says this is a pullback within an uptrend, not a top, so plan to buy confirmed strength in Comm Services and Energy on stabilization, not chase.