Market Triangle | 05.21.2025
A proprietary model that evaluates the current state of the market using three core components — Trend, Breadth, and Momentum.
⦿ Trend → Reversing
Trend signals are deteriorating. The 5-day trend flipped red, while 20-day and 50-day trends are starting to fade, with 50D showing early weakness. The 200-day trend remains negative, reinforcing a growing divergence between short-term pressure and long-term weakness. Trend structure has lost its alignment — a clear caution flag.
Short-term (5D) → Negative
Medium-term (20D & 50D) → Turning Neutral
Long-term (200D) → Still Negative
⦿ Breadth → Weakening
Breadth is clearly rolling over. Fewer stocks are making significant weekly or quarterly moves, and the 52-week New High/Low reading flipped back to red — signaling contraction in breakout participation. This drop in breadth is a key signal that leadership is thinning.
4% Week → Positive
25% Quarter → Negative
52w New High/Low (NHL) → Negative
⦿ Momentum → Cooling
Momentum is slipping. Velocity remains positive but has slowed considerably, and Delta is weakening, reflecting fading acceleration. Most notably, VIX is starting to rise, a sign of elevated risk premium creeping back into the market. This marks a potential shift toward volatility expansion.
Velocity → Slowing
Volatility (VIX) → Rising
The market’s technical posture is showing early signs of breakdown. Trend, breadth, and momentum are no longer aligned, and internal strength is fading. While this isn't a full reversal yet, it’s a sharp enough shift to demand more caution. If deterioration continues, a larger pullback may develop. Reduce risk, tighten stops, and favor cash or defensive exposure while waiting for the structure to reset.
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Broader Market Analysis
Widespread Selling: All major sectors closed lower except for Bitcoin (IBIT), which gained +1.44% — suggesting a defensive move into non-equity alternatives.
Small- and Mid-Caps Hit Hard:
Russell 2000 (IWM): -2.81%, the weakest performer, showing risk aversion and weakness in breadth-sensitive areas.
MidCap 400 (MDY): -2.67%, confirming broad-based pressure outside of mega caps.
Cyclical Weakness:
Industrials (XLI): -1.69%
Financials (XLF): -2.05%
Technology (XLK): -1.88% — a sign of institutional de-risking across growth and value segments.
Defensive Sectors Offer No Shelter:
Utilities (XLU): -1.82%
Consumer Staples (XLP): -1.16% — both declined, indicating broad distribution.
Health Care (XLV): Largest sector loser at -2.32%, despite being a typical defensive play.
Trend Breakdown:
Several sectors fell below short-term trend levels (20SMA, 50SMA) — with XLV and XLU breaking trend support.
Trend momentum (M-IO) weakened across the board, especially in XLV (-1.95%).
Bitcoin Outperforms:
IBIT led with a +1.44% gain and remains the only sector near YTD highs.
Suggests capital rotation into crypto or inflation hedge trades.
Overall, today's action reflects a risk-off rotation with pressure across the board — a potential warning sign of deeper correction if support zones do not hold.
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