The S&P 500 Index (^SPX) rally from March lows has been remarkable — 12% in under a month — and the earnings backdrop is supportive with 78% of reporters beating estimates. My trading framework reads 3-1 Risk-On this week, leaning offensive but no longer unanimous, notes Michael Gayed, editor of The Lead-Lag Report.
Signal 1 (Beta Rotation) remains Risk-On for a second consecutive week, with the State Street Utilities Select Sector SPDR ETF (XLU)/SPDR S&P 500 ETF Trust (SPY) four-week rate of change deepening to -10%. The S&P 500 continues to outperform utilities as the risk-on rally broadens.
Signal 2 (Treasury Rotation) holds Risk-On with March monthly data still in effect. The iShares 20+ Year Treasury Bond ETF (TLT) returned -4.5% versus iShares 7-10 Year Treasury Bond ETF (IEF) at -2.6%. Long-duration bonds continue underperforming intermediate maturities — a classic risk-appetite indicator. This signal will not update until April month-end data is available.
Signal 3 (Lumber/Gold) has flipped to Risk-Off as gold surges to record highs. Gold’s 13-week return of +-6.9% now overwhelms lumber’s -2.1% decline. The relentless gold bid above $4,800 an ounce reflects persistent inflation fears, central bank accumulation, and residual geopolitical hedging. Even as equities rally, the hard asset signal is flashing caution.
The S&P 500 at 7,165.07 sits +6.9% above its 200-day SMA of 6,705.59, firmly in Risk-On territory. The index surged to its highest close since January, powered by a 4.5% weekly gain. Signal 4 remains Risk-On. The breakout above 7,000 for the first time since early February is technically significant.
