Let’s get straight to it so you can get this into your brain to contemplate over the weekend while markets are closed.
The regime flipped back to “Bull Stalling” this week. Here are the three things I’m watching before the open Monday.
One. Whether slow SQN reverses or keeps falling. It printed +0.90 today, down 0.14 from yesterday. Fast is still ripping at +1.83, so the gap between them widened. If slow keeps fading while fast holds, the state flips from Bull Stalling to Chop and the mean-reversion regime takes over.
Two. The fast-slow spread. A 0.93 gap is historically wide. These gaps close by the fast number coming down, not by the slow number catching up. Translation: a pullback early next week is the base case, even if the broader trend holds.
Three. Credit. HYG versus LQD is neutral at +0.08%. Credit markets lead equities at turns and almost nobody is watching. If HYG starts underperforming LQD while the S&P tries to hold new highs, that’s the first real warning.