This is the most meaningful improvement in weeks. SPY has rallied sharply to $654.46 — recovering over $20 from Monday’s correction low of $634. The RSI has snapped back from 24 to 45, exiting deeply oversold territory. The VIX has pulled back to 25.1, declining from 30.0. Most notably, the short-term score has flipped from RISK OFF (-90) to CHOP (-20), the first time a timeframe has exited RISK OFF since the correction began intensifying. The composite has improved to -11, the best reading in over two weeks.

Sector Leadership

Materials surges into RISK ON, Healthcare exits RISK OFF — now only 4 sectors in RISK OFF, down from 6:

💡 What We’re Watching

• Short-term exits RISK OFF for the first time in weeks — The short-term score has improved from -90 to -20, flipping from RISK OFF to CHOP. This is the first timeframe to exit RISK OFF since the correction intensified. The RSI recovery from 24 to 45 and the 20-day breadth expansion from 16% to 48% confirm that short-term selling pressure has eased substantially. The 50-day breadth has improved to 28% and the 200-day breadth holds at 46%.
• VIX drops below 26 — a key milestone — The VIX has pulled back from 30.0 to 25.1, crossing back below the 26 level that has marked the upper boundary of normal volatility during this correction. While still elevated, the direction and magnitude of the decline suggest fear is subsiding.
• Materials surges into RISK ON — now 3 sectors in RISK ON — Materials has jumped from CHOP (+11) to RISK ON (+42), driven by a short-term score of +80. Combined with Energy (+76) and Utilities (+63), there are now three sectors in RISK ON for the first time since the correction began. This broadening of leadership is a constructive signal.
• Healthcare and Real Estate exit RISK OFF — Two sectors have transitioned from RISK OFF back to CHOP, reducing the RISK OFF count from 6 to 4. Healthcare improved from -47 to -22, while Real Estate improved from -35 to -24. When sectors begin exiting RISK OFF, it is one of the milestones we have been watching for.

The Bottom Line

Today’s data represents a meaningful shift. For the first time in this correction, multiple milestones we have been watching for are arriving simultaneously: the short-term exiting RISK OFF, the VIX declining below 26, sectors transitioning out of RISK OFF, and breadth expanding above 45% on the 20-day measure.

In our view, the caution flag is the medium-term score. At -75, it remains deeply negative and has not yet shown the kind of improvement that would confirm a sustainable recovery. Short-term bounces are common during corrections — the question is always whether the short-term improvement can pull the medium-term higher, or whether the medium-term weakness eventually drags the short-term back down.

We continue to watch for medium-term breadth to expand above 35%, the VIX to sustain below 22, and additional sectors to transition out of RISK OFF. If those conditions materialize in the coming days, the case for a durable bottom strengthens considerably.