Weekly Review - 2026-Mar-13
A Patient Approach to Market Rebound
US Cap. Weighted Sectors ordered by weekly performance (desc):
Weekly:
Daily:
Comment: SPY about to reach it daily SMA 200, which could offer some support to the market, after falling below the daily BB lower support band. XLK performance, considering the current geopolitical events, is quite good, specially if we compare it to XLF - impacted by the private credit events - and XLY, and XLI. We could derive from this relative performance that once the geopolitical events get resolved or priced-in, money will rotate out of XLE and back into XLK, which will make the market go higher, and bottom fishing in XLF, which will also help to propel market indices to ATH. Yet, we shall wait for the signal that the geopolitical events get resolved or priced-in.
Why is it happening? – Level 1
Economic Data: Production: ISM PMI vs. SPX
Analysis: No changes since last week.
Outlook: Bullish
Why is it happening? – Level 1
Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX
Analysis: No changes since last week.
Outlook: Bullish
Why is it happening? – Level 1
Economic Data: Consumption: Consumer Sentiment
Analysis: Consumer confidence deteriorated a bit on the last report. We keep our bullish outlook due to the low reading and the expectation of future improvement.
Outlook: Bullish
Why is it happening? – Level 1
USD & Interest Rates: FED, 2yr, and 10yr Rates
Analysis: Long-dated rates spiked higher due to the Iranian war. The impact on Fed Rates and Stocks will depends on the war’s length. As it is now is not good for the markets.
Outlook: Neutral to Bearish.
Why is it happening? – Level 1
USD & Interest Rates: USD vs EEM and S&P500
Analysis: The Iran war raised the USD and made EEM to fall sharply, as the impact on higher oil & gas prices will have a great impact on EEM.
Outlook: Bearish (the longer the war the higher the oil & gas disruption)
Why is it happening? – Level 1
Context Investors Sentiment: Credit Spreads
Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.
Analysis: Spreads (yellow line) trending lower.
Outlook: Bearish
Why is it happening? – Level 1
Investors Sentiment: AAII & NAAIM
AAII (American Association of Individual Investors) represents the position of retail traders. NAAIM (National Association of Active Investment Managers) represents the position of professional traders. We will be looking to enter contrarian positions against AAII and NAAIM extremes. When these indicators are not in extremes, we shall position aligned with them.
Analysis: AAII just flipped to the bearish side. NAAIM falling sharply lower from overbought level, still above mid-level. Note that even with the Iran war unfolding, there is no much bearish sentiment (yet?).
Outlook: Bearish
Level 1 Summary
Economic Data: Bullish to Neutral
USD & Interest Rates: Bearish
Investors Sentiment: Bearish
What is happening? – Level 2
Price Action: SPX – Trend – 20 years
Analysis: Price, finally, fell below the upper channel of the last 20 years trend. There is still margin for the market to fall until any significant resistance is reached.
Outlook: Bearish
What is happening? – Level 2
Price Action: RSP – Trend – Weekly
Analysis: Sharp decline in price and reversal on RSI and PPO.
Outlook: Bearish
What is happening? – Level 2
Price Action: RSP – Trend – Daily
Analysis: One of the rare occasions where RSP’s RSI is oversold. Previous occasions offered great entry points. We will wait to see if there is a positive price reaction and the RSI leaves the oversold area to change the outlook to Bullish.
Outlook: Bearish
What is happening? – Level 2
Breadth & Volatility: % Stocks above 200 SMA vs. RSP
Analysis: Signal crossed, and sharply, below SMA 50 and crossed below the 50 mark, meaning that less than 50% of the S&P 500 stocks are above their SMA 200.
Outlook: Bearish
What is happening? – Level 2
Breadth & Volatility: RSP and % Stocks above 200, 50, and 20 SMA
Analysis: SPXA50R (yellow) and SPXA20R (green) have entered bear territory.
Outlook: Bearish
What is happening? – Level 2
Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index
Analysis: Bullish Pct. Index formed a bearish divergence with price since the beginning of 2026 and is about to cross the 50 level on a downward trend.
McClellan just formed a peak and started the downward trend, which could be long as we are far away from any extreme low reading.
Outlook: Bearish
What is happening? – Level 2
Breadth & Volatility: Ratio Low Volatility Stocks / SPY vs. SPY & RSP
Analysis: Ratio crossed below its SMA50, triggering the bearish signal. Did the this indicator foretell the market downturn?
Outlook: Bearish
What is happening? – Level 2
Breadth & Volatility: New Highs vs. SPY & RSP
Analysis: New Highs continue lowering but they are not at extreme lows. We keep the Bearish outlook.
Outlook: Bearish
What is happening? – Level 2
Breadth & Volatility: VIX vs. SPY & RSP
This chart is mainly to detect market bottoms.
Analysis: VIX peaked due to weekend geopolitical issues. Then it lowered but it is on a clear uptrend.
Outlook: Expect high volatility. Markets can fall sharp here for a quick rebound later.
What is happening? – Level 2
Options: (Inverted) Put/Call Ratio vs. SPY
Analysis: P/C ratio in middle ground. Not too bearish not too bullish. Observe that from the peak on the 22nd of January, the market couldn’t advance. We shall see an extreme low reading for us to mark a Bullish opportunity.
Outlook: Neutral (expect choppiness)
What is happening? – Level 2
Options: Gamma Exposure – SPX
Analysis: In negative GEX. Expect higher volatility with rapid price movements.
Outlook: Neutral (expect choppiness)
Level 2 Summary
Price Action: Bearish
Breadth & Volatility: Bearish
Options: Neutral (expect choppiness)
What is happening? – Level 3
Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)
Analysis: Ratio below SMA200, triggering Bearish signal.
Outlook: Bearish
What is happening? – Level 3
Flows into High Beta ETF vs. SPY & RSP
SPHB Fund Flows show the appetite for High Beta (risk on) positions. A decrease on flows is a bearish signal, while an increase in flows is a bullish signal.
Analysis: SPHB fund flows keep falling.
Outlook: Bearish
What is happening? – Level 3
Sectors Bullish Percent Index
US Sectors order by ISM PMI Correlation
Growth - shall outperform when the market is bullish:
XLK: Technology (71%)
XLY: Cons. Discretionary (67%)
XLI: Industrials (66%)
XLB: Basic Materials (66%)
XLF: Financials (59%)
Value (shall outperform when the market is bearish):
XLV: Healthcare (55%)
XLC: Communications (49%)
XLE: Energy (44%)
XLU: Utilities (35%)
XLP: Cons. Staples (30%)
XLRE: Real Estate (16%)
Analysis:
Reduce exposure to: Energy, Utilities
Increase exposure to: Financials, Technology, Industrials
Level 3 Summary
Bulls vs. Bears: Bearish
High Beta Flows: Bearish
All Levels Summary and Final Thoughts
Level 1 Summary
Economic Data: Bullish to Neutral
USD & Interest Rates: Bearish
Investors Sentiment: Bearish
Level 2 Summary
Price Action: Bearish
Breadth & Volatility: Bearish
Options: Neutral (expect high choppiness)
Level 3 Summary
Bulls vs. Bears: Bearish
High Beta Flows: Bearish
Final Thoughts
A Patient Approach to Market Rebound
The past week has confirmed a decidedly bearish tone, driven by heightening geopolitical tensions. Historical data suggests that while conflict-induced volatility initially shocks the system, markets typically price in these risks over several weeks before finding a floor and surging.
We are currently monitoring for signs of selling exhaustion, which have yet to materialize. We are looking for specific technical shifts before deploying fresh capital:
Breadth Indicators: An uptick in stocks trading above their 200-day SMA and a recovery in the Bullish Percent Index.
Price Confirmation: Momentum shifts, such as the RSI exiting oversold territory.
Meanwhile, maintain your core dividend-yielding positions to capture cash flow while accumulating dry powder. We remain defensive until the price action confirms a sustainable recovery signal.