SPY extended its rally to $711.21, gaining $7.13 from Tuesday’s $704.08 close as the advance off the March 30 correction low of $634 accelerated to 12.2%. The composite strengthened to +51 RISK ON as the market shook off Tuesday’s consolidation attempt and resumed its climb. The short-term surged to +83 RISK ON as participation rebounded. The medium-term improved to +38 RISK ON, strengthening from Tuesday’s +32 and moving further above the critical +30 threshold with approximately 59% above the 50-day MA. The long-term remains robust at +62 RISK ON with approximately 62% above the 200-day MA. The sector count expanded to 5 RISK ON as Energy climbed back into RISK ON territory (+36), though Healthcare remains stubbornly in RISK OFF (-30).

Sector Leadership

5 sectors RISK ON, 5 CHOP, 1 RISK OFF — Energy rebounds while Healthcare remains weak:

💡 What We’re Watching

• SPY extends rally to $711.21 as momentum accelerates — The S&P 500 gained $7.13 from Tuesday’s $704.08 close, reclaiming the advance after Tuesday’s brief consolidation attempt. The market has now rallied 12.2% from the March 30 correction low of $634, with the last five sessions showing renewed strength (+1.6% over 5 days).
• Breadth improves as medium-term score strengthens to +38 — The percentage of stocks above their 50-day moving average improved to approximately 59%, pushing the medium-term score to +38 from Tuesday’s +32. This move away from the critical +30 RISK ON threshold suggests the consolidation was indeed a pause rather than a reversal. The short-term surged to +83 as approximately 68% of stocks trade above their 20-day moving averages.
• Energy recovers to RISK ON (+36) as sector count expands to 5 — Energy climbed back into RISK ON territory with a composite score of +36, driven by medium-term strength (MT at +45) and solid long-term foundations (LT at +80 with 100% of Energy stocks above their 200-day MA). Despite short-term weakness (ST at -70 with only 22% above 20d MA), the sector’s recovery signals renewed interest in cyclical exposure. This brings the total RISK ON count to 5 sectors.
• RSI remains extremely elevated at 90.6 despite slight cooling — While the extreme reading has eased modestly from Monday’s 97.7 and Tuesday’s 90.2, the RSI remains well above the 70 overbought threshold typically associated with near-term consolidation risk. The fact that the market is pushing higher despite this extreme reading suggests underlying momentum remains intact, though it also increases the probability of a pause or pullback in the coming sessions.
• VIX steady at 19.27, signaling persistent caution — The VIX remains elevated near 19, well above the sub-15 calm-market threshold. This persistent elevation in implied volatility despite the strong rally suggests investors continue to hedge for near-term uncertainty and potential deeper consolidation, even as the advance extends.

The Bottom Line

Wednesday’s rally extended the advance that began from the March 30 correction low, with SPY climbing to $711.21 and the composite strengthening to +51 RISK ON. The medium-term score improved to +38, moving further above the critical +30 threshold and suggesting that Tuesday’s pullback was a brief consolidation rather than the start of a deeper correction. The market remains in RISK ON territory across all three timeframes, with breadth improving across both short-term (68% above 20d MA) and medium-term (59% above 50d MA) measures.

In our view, the market’s ability to shake off Tuesday’s weakness and resume the advance demonstrates the underlying strength of the current RISK ON regime. The expansion of the sector count from 4 to 5 RISK ON sectors — with Energy climbing back above the +30 threshold — reinforces this view and suggests renewed interest in cyclical exposure. The continued dominance of Technology (+85), combined with strength in Real Estate (+42), Industrials (+40), Energy (+36), and Materials (+32), reflects a broadening risk-on appetite that extends beyond just mega-cap tech leadership.

That said, the extreme RSI reading of 90.6 remains a meaningful near-term risk. While elevated RSI alone is not a sell signal — markets can remain overbought for extended periods during strong trends — it does increase the probability of additional consolidation or pullback in the coming sessions. The persistent VIX elevation near 19 suggests investors are hedging for this possibility, even as they continue to participate in the rally.

The key development to monitor is whether the medium-term score can continue to strengthen away from the +30 threshold. At +38, the score has moved meaningfully higher from Tuesday’s +32, suggesting the intermediate-term trend is solidifying. A further move toward +50 would provide additional confirmation that the advance has room to run. Conversely, a reversal back toward +30 would signal renewed consolidation risk.

The sector rotation remains constructive, with cyclical sectors leading and defensive sectors lagging. Healthcare’s continued weakness (-30 RISK OFF) is a notable divergence, but the collapse in defensive sectors like Utilities (ST at -85) and Consumer Staples (ST at -10) aligns with the risk-on environment. The fact that Energy recovered to RISK ON despite short-term weakness (only 22% above 20d MA) suggests investors are looking past near-term volatility and positioning for continued economic strength.

We would characterize the current environment as a RISK ON regime with near-term overbought conditions. The rally has extended meaningfully from the March 30 low, and the extreme RSI reading suggests a pause or pullback is increasingly likely in the near term. However, the improvement in breadth, the strengthening of the medium-term score, and the expansion of the RISK ON sector count all suggest the underlying trend remains intact. For portfolios positioned for this environment, the key is to remain disciplined — take profits opportunistically on extended positions while maintaining exposure to sectors with strong fundamentals and favorable regime scores. Additional near-term choppiness would not be surprising, but the broader RISK ON backdrop remains supportive.