Pathway to New Highs
The primary outlook is that the market is on a pathway towards new all time highs. This view will be reassessed if the three risk-off criteria trigger another alarm—the last alarm being February 21. Until then, I’m positioned for continued upside, with a particular focus on potential outperformance from the modern small-cap category.
Despite a flood of market-moving headlines over the past month, the S&P 500 has carved out a relatively clean consolidation over the last two weeks—an encouraging sign that supports the bullish case.
Risk Off Criteria: 1 of 3 Active
Each week, I assess the market using three core signals that define the broader environment as either risk-on or risk-off. When all three are triggered simultaneously, it sets off the "alarm."
Short-Term Trend — Price relative to the 20-day exponential moving average (S&P 500)
Breadth — Net new highs vs. new lows across NYSE and Nasdaq
Momentum — Percentage Price Oscillator (PPO) on the S&P 500
As of Friday’s close:
Trend: The S&P 500 remains above its 20-day moving average. This level continues to act as short-term support. In a market pacing toward new all-time highs, pullbacks to this level remain attractive buying opportunities.
Breadth: New highs continue to outpace new lows. While I’ve previously cautioned that breadth has been relatively flat, the consistency of positive readings is increasingly supportive of the bullish case.
Momentum: The PPO remains the only active risk-off signal, as expected. After stretching to the upside, this reversion was anticipated and has been discussed at length throughout May.
With only one risk-off signal active, the environment remains tilted towards bullish participation.
Since gapping higher on May 12, the S&P 500 has delivered exactly what bulls want to see—an orderly consolidation of the April rally. The playbook has been to build exposure on pullbacks toward the short-term moving average, now at 5808.
The Risk Criteria Score Histogram below will now be a recurring visual in both Sunday and Wednesday notes. It shows a daily score (0 to 3) representing the number of risk-off criteria currently triggered—helping visually track market environment changes.
Over the past two weeks of consolidation, risk has remained well-contained. The system has flagged, at most, a single signal—keeping the backdrop favorable for long exposure.
Sentiment & Positioning
The CNN Fear & Greed Index held steady at 62—still in “Greed” territory. Meanwhile, the NAAIM Exposure Index rose to 88, placing it near the top of its 12-month range. Historically, market peaks are accompanied by extreme sentiment and stretched positioning—both of which are on watch.
Navigating The Short Term— Key Levels Into Next Sunday
Heading into next week the case remains the same— momentum was extended to the upside and is now beginning to cool off. This cooling off will either manifest with more sideways trading, or intraday corrections towards the short term moving average. The key trade zones remain unchanged:
Trade Zones
Shopping Zone: The short-term moving average (currently 5808). Temporary breaks below this level are acceptable but should be brief—this area remains a base for accumulating long exposure.
Sell Zone: All-time highs (>6147) — lock some return in and reassess market conditions.
Keep an eye on 5650. This level aligns with the long-duration moving average. Daily closes above it are important for maintaining the constructive bullish view.
6147 — all time highs
6000 — psychological whole number resistance, acted as recent support this past January, and a visual pivot from 2024
5808* — short term moving average
5765 — late September all-time high range + consolidation range prior to next series breakout, aligned near the short term moving average
5650 — low range of September - October 2024 consolidation + prior all time high range from July & September 2024, aligned with the long term moving average
5400 — July & September 2024 pivots
5250 — April 2024 all time high, May 2024 breakout level— anticipated support if breakdown below 5400
Small Caps—
ARK Innovation ETF (ARKK)
ARKK remains above the key 52 breakout level—a significant development given that price consolidated between 34 and 52 for nearly three years. This breakout is bullish, and I continue to speculate on outperformance from this modern small-cap proxy.
The trade plan for ARKK remains simple:
Accumulate long exposure near the 50-day moving average or on a retest of 52 as support
If price closes below 52, trade will be exited and restarted
You may recall a similar setup in early 2024 that required multiple entries before gaining traction—this may unfold the same way.
Currently, ARKK is building a new consolidation range between 55 and 58.50. The upper boundary marks the next breakout level, while the lower range offers an attractive zone to build position size.
IWM - Russell 2000 ETF
The traditional small-cap benchmark continues to lag. Price remains stuck between 205 and 212. A decisive breakout above 212 would offer additional confirmation for the bullish case.
Bonds (20+ Year Treasury Bond)
No major changes in bond positioning this past week.
I have maintained a 20% allocation to long bonds, and my stance remains the same: the bond market continues to offer an attractive opportunity to build a defensive posture. That threshold was revised to $90 in January.
TLT is approaching the October lows— in the scenario where this low is broken I will look to establish the final allocation to bond positioning (30%)
Summary Outlook
The primary outlook remains a constructive rally toward new all-time highs, with ARKK—the modern-day risk-on proxy—offering a trade setup for potential outperformance. This bullish view is supported by three key market signals: trend, breadth, and momentum. Should all three flip to risk-off, the speculation would shift accordingly.
Strategy Updates— Immediate Term
Key Bullish Criteria:
Shopping Zone: S&P 500 pullbacks toward the short-term moving average (currently 5808) offer accumulation opportunities.
Risk-Off Signals: 1 of 3 active. The short-term trend is intact, breadth is positive, however momentum continues to create looming short term risk as this reverts to the mean
Small Cap Trade: Long ARKK. Continue holding above 52; exit below this level.
Breakout Confirmation: ARKK holding above 52, and IWM clearing 212, remain key technical signals
Bearish Scenarios:
No bearish positioning is considered unless all three risk-off signals trigger the alarm. Any weakness before then will be treated as a healthy correction within a larger bullish structure, with initial response focused on hedging long exposure rather than reversing posture.
Short S&P 500: No hedges in place, no active short trade
Bond Exposure: 20% allocated; I remain flexible to scale to 30% through June as conditions evolve
Trade Ideas:
The end of month update last Sunday included updates to all open trade ideas, including the addition of Novo Nordisk (NVO) as a new candidate.
In May of last year, Victoria’s Secret (VSCO) was introduced and went on to hit two targets within six months—returning +52% and +135% respectively. I’m returning to this idea again for another trade accumulating long 18 - 22 and targeting 31.
Bottom Line:
For another week, the stance remains simple: bullish until proven otherwise—and that "otherwise" would only come if all three risk-off criteria fire together.
Disclaimer: The information in this article is for informational purposes only and should not be considered financial advice or a recommendation for any investment. I am not a financial advisor, and the content is not intended to serve as financial advice. It is solely intended to journal thought, ignite more thought and discussion.