The final recovery milestone has been met. The VIX has dropped to 20.2 — breaking decisively below the 22 threshold we have been tracking for weeks as the last signal of a fully confirmed recovery. All four milestones we outlined at the start of this recovery are now checked. SPY holds at $659.22, the composite remains positive at +6, and 57% of stocks are above their 20-day moving averages. The short-term has eased from yesterday’s RISK ON reading of +30 back to CHOP at +10, a natural consolidation after the sharp move higher. The medium-term remains at -58 with 33% above the 50-day MA, and the long-term holds at +17 with 47% above the 200-day.

Sector Leadership

Sector structure holds at 2 RISK ON, 7 CHOP, 2 RISK OFF — Consumer Discretionary weakens notably:

💡 What We’re Watching

• VIX breaks below 22 — the final recovery milestone is met — At 20.2, the VIX has dropped decisively below the 22 threshold we identified weeks ago as the last condition for a fully confirmed recovery. All four milestones are now checked: the short-term exited RISK OFF, sectors transitioned out of RISK OFF (from 6 to 2), breadth expanded past 35% on the 50-day, and the VIX has normalized. This is a significant moment in the recovery.
• Consumer Discretionary deteriorates sharply to -78 — While most of the market improves, Consumer Discretionary is moving in the opposite direction. The medium-term has hit -100, the absolute floor, and the long-term has dropped to -70. This sector is now the deepest in RISK OFF of any sector during the entire correction. The divergence between Consumer Discretionary and the rest of the market is the widest it has been.
• Short-term consolidates from RISK ON back to CHOP — The short-term eased from +30 to +10, a natural pullback after yesterday’s sharp move. With 57% of stocks above the 20-day MA and SPY still above its 20-day, this appears to be healthy consolidation rather than a reversal. The RSI at 44 remains in neutral territory.
• Energy surges to +87 — strongest sector reading of the entire period — Energy continues to separate from the pack with a long-term score of +95 and medium-term at +100. Geopolitical tensions related to Iran may be contributing to energy sector strength.

The Bottom Line

All four recovery milestones are now met. The VIX breaking below 22 completes the checklist we outlined at the start of this recovery — a checklist that, at the time, seemed ambitious given the market was in the depths of a correction with an RSI of 24, six sectors in RISK OFF, and the VIX at 30.

In our view, the weight of evidence now suggests the correction has likely run its course for the broad market. The composite is positive, volatility has normalized, and the majority of sectors are in CHOP or better. The medium-term score at -58 still reflects damage from the correction, and it will take time for 50-day breadth to fully recover. But the direction across nearly every metric is constructive.

The notable exception is Consumer Discretionary, which at -78 is deteriorating while everything else improves. This divergence bears watching — when one sector is moving this sharply against the grain, it can either resolve by catching up to the broader recovery or serve as an early warning that the recovery has limits. Financials at -43 also remains in RISK OFF, though its short-term reading of +45 suggests it may be the next sector to transition.