The Market Monitor has delivered one of the strongest upside reversals seen in this cycle, moving sharply higher from deep Risk Off conditions into a “Risk ON – Moderate” stance, accompanied by a rare cluster of buy signals across breadth, momentum, trend strength, and cross-asset leadership.
Regime progression:
- 14 Mar 2025: Risk OFF
- 02 May 2025: Risk OFF
- 16 May 2025: Risk ON – Moderate
This is a decisive improvement following two months of persistent internal stress, and the nature of the move indicates more than a simple oversold bounce. Multiple structural components flipped positive simultaneously, marking a genuine shift in internal market character.
Sequence of the Reversal
The improvement built gradually but accelerated into a concentrated burst of strength during the week ending 16 May.
Large-Cap leadership reasserts itself
Large-cap equities began outperforming meaningfully. This shift is historically one of the earliest signs of stabilisation when coming out of Risk Off conditions, signaling that institutional flows are returning to the most liquid parts of the market.
High Beta reclaims leadership over low volatility
High beta stocks began outperforming low-volatility stocks, hallmark of early risk-taking behaviour and typically appears only when risk appetite is rebuilding with conviction. It reinforces that investors are moving away from defensive, minimum-volatility havens and toward more cyclical exposure.
Momentum market trend turns positive
The primary momentum condition for the equity market turned up for the first time in weeks. Momentum readings shifting into positive territory confirm that price behaviour is no longer deteriorating on a trend basis. This is a core requirement for any durable regime upgrade.
Price Trend Efficiency breaks higher
Price trend stability for major indices flipped to positive. This reflects a structural improvement: markets are no longer experiencing choppy or inefficient trend patterns but are shifting toward more persistent upside behaviour.
Market Breadth turns Risk On
Broad participation improved across sectors and indices. Most critically, market breadth transitioned decisively into Risk On territory. More stocks began advancing simultaneously, reducing concentration risk and signaling healthier internal participation.
Dominance and reversal conditions become constructive
Measures of market dominance and short-term reversal strength turned positive. These confirm that downside momentum has dissipated and that buyers have taken control of short-term market structure.
Structural Trend strength improves
The percentage of stocks below their long-term average improved from deeply weak levels. All three major indices moved above their risk on trigger levels. Improving long-term position alongside broad intermediate-term recovery reflects stabilisation across timeframes.
High-Risk Liquidity turns positive
High-risk liquidity indicators flipped into positive territory. This suggests renewed demand for risk assets and re-engagement by growth-oriented capital, aligning with the broader internal recovery.
Offensive vs Defensive Sectors: Gap-Up outperformance
Offense outperformed defense in a decisive gap-up, Growth outperformed value with a notable gap higher. These relative performance shifts typically occur only during durable early-phase reversals and are consistent with the broader pivot into a constructive risk-taking environment.
Interpretation
This is not a technical bounce, not a short-term squeeze, and not a liquidity-driven anomaly.
The combination of leadership rotation, breadth expansion, improved momentum, positive liquidity behaviour, and structural stabilisation signals a genuine transition out of Risk Off.
The character of the market has shifted from “defensive positioning, weak structure, and fragile breadth” to “broad-based improvement with risk appetite returning”. Improving long-term position alongside broad intermediate-term recovery reflects stabilisation across timeframes. The internal indicators underlying the upgrade align more closely with the early stages of a constructive market phase. The Market Monitor now supports a measured re-entry into risk assets.
Recommended posture
- Begin rebuilding equity exposure
- Prioritise trend-following systems over mean-reversion setups
- Emphasise large caps, high beta, and growth-oriented sectors
- Maintain a partial cash buffer until long-term breadth improves further
- Use pullbacks within the newly positive trend structure for incremental entries
While not yet a full Risk On confirmation, the internal improvements justify shifting from protection to aggressive participation.
Summary
After two months in a Risk Off regime, the market executed a rare, synchronised upside reversal, driven by improvements in momentum, breadth, leadership, and liquidity. The regime has climbed out of Risk Off and now stands in a constructive “Risk ON-Moderate” position, supported by multiple buy signals.
The framework recommends a strong re-engagement with risk assets, emphasising sectors and styles showing strong leadership and improving trend dynamics.