SPY extends its pullback to $710.62 in intraday trading, declining $4.55 from Monday’s close of $715.17, though the composite score has strengthened to +60 from yesterday’s +49. All three timeframes remain aligned in RISK ON territory with the long-term score surging to +85 from +45. Short-term breadth holds at 73% above the 20-day MA, medium-term breadth at 73% above the 50-day MA, and long-term breadth at 82% above the 200-day MA. The VIX holds steady at 18.30 while the RSI continues to moderate to 76.3 from recent extreme readings above 85. The sector count stands at 8 RISK ON, 2 CHOP, and 1 RISK OFF, with Technology surging to leadership at +96.

Sector Leadership

8 sectors RISK ON, 2 CHOP, 1 RISK OFF — Technology, Real Estate surge:

💡 What We’re Watching

• Composite score strengthens to +60 despite SPY extending pullback to $710.62 — The most significant development in today’s intraday action is the divergence between price and regime strength. While SPY has declined $4.55 from Monday’s close to $710.62, the composite score has surged from yesterday’s +49 to +60, well above the +30 RISK ON threshold. This reflects improving long-term breadth and sector strength rather than deteriorating conditions.
• Long-term score surges to +85 from +45, breadth holds at 82% — The long-term timeframe has strengthened dramatically, jumping from +45 to +85 as 82% of stocks remain above their 200-day moving averages. This surge in long-term strength confirms that the recent rally has not just been a short-term momentum burst but has established a more durable foundation. The 200-day MA is the most important long-term trend indicator, and 82% participation suggests broad-based structural improvement.
• Technology surges to +96, Real Estate climbs to +88 — Sector leadership has intensified with Technology exploding to +96 (from +84 at yesterday’s close) with all three timeframes maxed out: ST +80, MT +100, LT +100. Real Estate has surged to +88 with both medium-term and long-term at +100. These are among the strongest sector readings of the year and confirm that leadership remains concentrated in growth-oriented Tech and rate-sensitive Real Estate.
• 8 sectors maintain RISK ON status with upgrades accelerating — The sector count holds at 8 RISK ON, 2 CHOP, and 1 RISK OFF, though the quality of those RISK ON readings has improved. Industrials strengthened to +72 with long-term at +100, Communication Services climbed to +68 with long-term at +100, and Consumer Discretionary improved to +56. Energy, Materials, and Utilities all show long-term scores at +100, confirming that the rally’s foundation extends across cyclical and defensive sectors.
• RSI moderates to 76.3, VIX steady at 18.30 — The RSI has continued to ease from extremely overbought readings above 85 to 76.3, though this level still suggests elevated near-term conditions. The VIX holds steady at 18.30, close to the sub-18 levels typically associated with market complacency. The combination of moderating RSI and stable VIX during a pullback is constructive — it suggests the market is digesting gains without panic or capitulation.
• Healthcare deteriorates further to -68, deeply oversold at RSI 28.8 — Healthcare continues to be the most significant area of concern, weakening from -56 to -68 with both short-term and medium-term scores at -100. The RSI at 28.8 marks deeply oversold conditions, and relative underperformance of -12.0% versus SPY over 20 days is the worst in the sector universe. While oversold conditions could set up a relief bounce, the medium-term structure at -100 suggests any rally would face significant resistance.

The Bottom Line

Today’s intraday action presents a textbook example of why looking beneath the surface matters more than watching the headline SPY number. While SPY has extended its pullback to $710.62 (down $4.55 from Monday), the composite score has surged from +49 to +60, and the long-term score has exploded from +45 to +85. This divergence between price and regime strength tells us that the underlying market structure is strengthening, not weakening.

The most encouraging signal is the long-term breadth holding at 82% above the 200-day moving average even as SPY pulls back. When long-term breadth remains this elevated during near-term weakness, it typically signals that the rally foundation remains intact and that the pullback represents profit-taking or rotation rather than a structural breakdown. The surge in long-term scores across sectors — with Technology, Real Estate, Energy, Industrials, Communication Services, Materials, and Utilities all showing long-term readings at +100 — confirms this interpretation.

Technology’s surge to +96 and Real Estate’s climb to +88 reflect the market’s continued confidence in two dominant narratives: the AI/technology revolution and the rate-sensitive sectors benefiting from declining yield expectations. The breadth of sector strength — with 8 of 11 sectors in RISK ON and multiple sectors showing long-term scores at +100 — suggests this is not a narrow, fragile rally dependent on a handful of mega-cap names.

The one significant area of concern remains Healthcare, which has deteriorated from -56 to -68 with both short-term and medium-term at -100 and RSI at 28.8 marking deeply oversold conditions. This sector-specific weakness — with -12.0% relative underperformance versus SPY — suggests structural headwinds beyond normal rotation dynamics. The deeply oversold RSI could set up a relief bounce, but the medium-term structure at -100 indicates any rally would likely face resistance.

The RSI at 76.3 and VIX at 18.30 continue to suggest elevated but moderating near-term conditions. The fact that the RSI is easing from extreme levels above 85 while the composite score strengthens to +60 is particularly constructive — it suggests the market is working off overbought conditions through time and rotation rather than price alone. Near-term volatility remains likely as this digestion process continues, but the surge in long-term strength to +85 and the breadth resilience at 82% suggest any weakness should be contained within an intact RISK ON regime.