STRONG MOMENTUM - RISK ON

S&P 500 (SPY): $689.72 (+0.02% daily, +0.96% weekly) NASDAQ (QQQ): $620.44 (-0.57% daily) VIX: 15.67 10-Yr Yield: 4.18% Gold (GLD): $409.37 Fear & Greed Index: 44.8 (fear)

The U.S. equity markets exhibited mixed signals, with the S&P 500 advancing slightly, supported by bullish sentiment, while the NASDAQ experienced downward pressure. The VIX maintains a moderate level of 15.67, indicating a tempered yet present market volatility level. The 10-year Treasury yield at 4.18% remains attractive for income seekers, demonstrating a balanced growth outlook amid inflationary concerns. The Fear & Greed Index, reading at 44.8, signals a market sentiment teetering on the edge of fear, presenting potential buying opportunities within certain sectors.

• The SPY's bullish gauge of 61.8 suggests ongoing momentum that could drive upward price action. • The current stability of the 10-year yield at 4.18% with a healthy yield curve supports continued economic growth and equity markets' upside potential. • The bullish sentiment, with 19 assets marked as Strong Bullish and 26 as Bullish, provides a solid foundation for further market gains. • The IWM gauge at 70.7 points to a strong bullish outlook for small-cap stocks, indicating potential sector leadership in the near term.

• An increasing NASDAQ downturn could test critical support levels, exacerbated by tech sector vulnerabilities. • Corporate earnings projections may face downgrades if macroeconomic variables do not stabilize, triggering a potential market retreat. • Rising concerns over international market instabilities may weigh significantly on global-linked large-cap performances. • A spike in the Fear & Greed Index toward extreme fear levels could initiate broader sell-offs, disrupting current bullish trajectories.

Given the current strong bullish probabilities, portfolios should be tactically positioned to overweight equities, particularly favoring sectors with robust earnings growth and compelling valuation metrics. It is advisable to maintain a diversified equity allocation with a notable emphasis on small-cap holdings such as those suggested by the IWM gauge. Investors should remain cautious of sector-specific risks, particularly in technology, by balancing exposure with financial and consumer discretionary sectors. Risk management strategies should include setting stop-loss orders at key support levels, particularly for tech-heavy allocations, to protect against unexpected downturns.

• S&P 500: $675 support level, $705 resistance level - a breach of these levels would signal potential technical shifts. • VIX: 13 floor, 20 ceiling - movements outside this range could indicate significant volatility changes. • 10-Yr Yield: 4.25% as a critical threshold, where surpassing could pressure equity valuations. • Gold (GLD): $400 support - a fall below this level may point to shifting defensive market postures.

Despite the predominantly bullish outlook, maintaining a contrarian position is warranted due to the Fear & Greed Index hovering near fear levels, which often precedes market recoveries. Strategic allocation into undervalued assets presents potential for outsized gains, particularly within the small-cap sector. Investors should prepare for calculated entry points during short-term volatility to optimize portfolio performance.

NEXT REVIEW: Thursday, January 23, 2026