Macro Calm, Tactical Caution: Awaiting Confirmation After DeMark Sell Signals
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Despite the market’s resilience and the return to a “quiet” Turbulence regime, the SPX DeMark setup now flashes tactical caution. Sequential and Combo ‘13’ sell signals on the S&P 500 suggest potential trend exhaustion, but with no VIX backwardation to trigger contrarian risk-on sentiment, a wait-and-see posture is prudent. All eyes on next week’s confirmation window.
Market Breakdown
SPX DeMark Indicators
The S&P 500 chart displays both a Sequential and Combo 13 sell signal completed in early June, suggesting trend exhaustion. Importantly, we are still within the 12-bar window in which a reversal should occur for the signal to remain valid. Price action has softened modestly since, failing to punch above resistance around 6100–6170 — the DeMark Risk Level zone. MACD is trending lower, further undermining momentum. Unless the SPX can regain strength soon, the probability of a tactical pullback increases.
Turbulence Index
After weeks of elevated Mahalanobis turbulence, the index has returned decisively to the “quiet” regime. This means no significant correlation or magnitude outliers are present — a typical environment for stable market behavior. The absence of recent spikes supports a base-case of ongoing macro calm, with the turbulence reading below 1 and light blue bars prevailing since early June .
VIX Curve
The VIX term structure currently remains in contango, with no meaningful backwardation. The slope is not inverted and offers no contrarian signal to step in aggressively. As such, volatility metrics are not providing any asymmetric entry opportunities at this point.
Portfolio Implications
Given the neutral turbulence backdrop and the bearish DeMark signals still within their active window, we favor a neutral to cautious tactical posture. Portfolio tilts should lean toward defensive equity allocations or increased optionality via hedges. A deeper correction is not guaranteed, but downside risks have increased relative to upside potential.
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Federico Polese
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