The market delivered a meaningful shift in structure today, with leadership broadening from three to five RISK ON sectors as Industrials and Utilities joined Technology, Energy, and Real Estate in confirmed uptrends. The composite score improved to +34 RISK ON, driven by the medium-term score advancing to +26 and the long-term holding at +52, while the short-term remains at +17 CHOP. The sector count now stands at 5 RISK ON, 5 CHOP, and 1 RISK OFF, marking the most balanced distribution in recent weeks and suggesting the rally may be developing broader support.

Sector Leadership

5 sectors RISK ON, 5 CHOP, 1 RISK OFF — Leadership broadens as Industrials and Utilities upgrade:

💡 What We’re Watching

• Leadership broadens from 3 to 5 RISK ON sectors as Industrials and Utilities upgrade — The most significant development today is the expansion of sector-level strength, with Industrials surging from +21 CHOP to +46 RISK ON and Utilities jumping from +6 CHOP to +36 RISK ON. Industrials improved across all timeframes, with the medium-term score advancing from +5 to +35, signaling a strengthening uptrend. Utilities saw a similar upgrade, with the medium-term recovering from -35 to +10. This broadening of leadership suggests the rally is developing a more sustainable foundation, moving beyond the narrow Technology dominance that characterized recent sessions.
• Composite score advances to +34 RISK ON with medium-term reaching +26 — The composite score’s improvement from recent CHOP readings to +34 RISK ON marks a meaningful shift in market structure. The medium-term score advanced to +26 RISK ON, up from neutral territory, while the long-term held at +52 and the short-term remains at +17 CHOP. The 5/5/1 sector distribution (5 RISK ON, 5 CHOP, 1 RISK OFF) is the most balanced we’ve seen in weeks, contrasting sharply with the recent 3/7/1 imbalance that suggested fragile, narrow leadership.
• Technology strengthens to +88 with medium-term hitting perfect +100 score — Tech not only maintained its leadership but strengthened further, with the composite score advancing from +85 to +88. The notable development is the medium-term score reaching +100 — a perfect reading indicating all medium-term technical metrics are firing positively. With 76% of stocks above their 50-day moving average, a 3-month return of +11.6%, and relative strength of +7.7% versus SPY over three months, Technology remains the dominant force. However, the presence of four other RISK ON sectors means the rally is no longer solely dependent on this single area of strength.
• Energy holds at +64 with exceptional 100% breadth above 200-day MA — Energy maintained its +64 RISK ON composite, with a particularly impressive long-term structure showing 100% of stocks above their 200-day moving averages. The sector’s relative strength of +14.4% versus SPY over three months confirms sustained outperformance, though the short-term score at +50 and medium-term at +55 suggest momentum is moderating rather than accelerating. This stability in Energy provides an important counterbalance to Technology’s dominance.
• CHOP sectors show improvement, with Consumer Staples and Consumer Disc rallying — Even within the CHOP category, improvement is evident. Consumer Staples rallied from -6 to +19, with short-term momentum turning bullish (ST +45, RSI 67). Consumer Discretionary improved from -10 to +7, also showing short-term strength (ST +35, RSI 66). Materials advanced from +24 to +30, and Communication Services strengthened from +14 to +27. The only CHOP sector deteriorating is Financials, which weakened from -12 to -16, remaining constrained by its death cross and long-term weakness.
• Healthcare improves but remains deeply oversold at -42 RISK OFF — Healthcare showed signs of relief, improving from -52 to -42, though it remains the only RISK OFF sector. The RSI recovered from 29 (deeply oversold) to 42 (weakening), and the 5-day return turned positive at +1.2%. However, the medium-term structure remains broken at -80 with only 16% of stocks above their 50-day moving averages, and the sector continues to underperform SPY by -10.2% over 20 days. While the improvement suggests selling pressure may be easing, the structural headwinds remain intact and any rally would likely face resistance at key moving averages.

The Bottom Line

Today’s session delivered a notable shift in market character, with leadership broadening from three to five RISK ON sectors and the composite score advancing to +34 RISK ON. The most significant developments were Industrials surging from +21 CHOP to +46 RISK ON and Utilities jumping from +6 CHOP to +36 RISK ON, marking the first time in weeks that the rally has expanded beyond the narrow Technology-Energy-Real Estate leadership that characterized recent trading. This 5/5/1 sector distribution (5 RISK ON, 5 CHOP, 1 RISK OFF) suggests a healthier, more balanced market structure.

The medium-term score’s advance to +26 RISK ON confirms this improvement is not just short-term noise but reflects strengthening uptrend structures across multiple sectors. Technology’s medium-term score hitting a perfect +100 reading while Industrials’ medium-term improved from +5 to +35 and Utilities’ medium-term recovered from -35 to +10 indicates broad-based participation developing beneath the surface. This contrasts with the fragile, top-heavy structure we saw earlier in the week when only three sectors carried RISK ON readings.

The improvement within CHOP sectors is equally notable, with Consumer Staples rallying from -6 to +19, Consumer Discretionary advancing from -10 to +7, and Materials strengthening from +24 to +30. These moves suggest rotation is occurring not just at the top (into new RISK ON sectors) but across the broader market, with multiple areas showing improving momentum even if they haven’t yet reached RISK ON thresholds. The only area of concern is Financials, which weakened from -12 to -16 and remains constrained by its death cross and weak long-term structure.

Healthcare’s improvement from -52 to -42 and the RSI recovery from deeply oversold levels (29 to 42) suggests selling pressure may be easing, but the medium-term structure at -80 with only 16% of stocks above their 50-day moving averages indicates the sector remains structurally weak. Any bounce would likely face resistance, and the sector’s persistent underperformance of -10.2% versus SPY over 20 days suggests it will take time for confidence to return.

The key question now is whether this broadening of leadership can be sustained. Five RISK ON sectors is a meaningful improvement from three, but it’s still far from the nine or ten we’d see in a truly healthy bull market. The medium-term score at +26 RISK ON and long-term at +52 provide support, but the short-term remaining at +17 CHOP suggests near-term momentum is still mixed. For this rally to mature into something more durable, we’d want to see Materials (+30 CHOP) and Communication Services (+27 CHOP) upgrade into RISK ON territory, pushing the count to seven sectors, and for the CHOP sectors to continue firming rather than rolling over.

For now, this is an encouraging session that shifts the market from fragile narrow leadership to broader participation. The 5/5/1 sector distribution is significantly healthier than the 3/7/1 we saw recently, and the improvement in Industrials and Utilities suggests cyclical and defensive areas are both finding footing. Investors can be more constructive than they were earlier in the week, with opportunities expanding beyond just Technology. However, this remains a market that requires selectivity — focus on the five RISK ON sectors and the improving CHOP names, avoid Financials and Healthcare, and watch whether Materials and Communication Services can join the RISK ON ranks in coming sessions.