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G’day Blokes and Sheilas,

Musk here! The latest edition of The Musk Report is here. Scroll straight to the bottom if you want the slide deck with every chart that has gone into this weeks analysis.

Let’s dive in…

For a week where longs were strongly supported, the outcome was a little more complicated than the headline verdict suggested. I would expect the higher-risk areas of the bull basket to do most of the heavy lifting, but Materials, Industrials, Property and Small Caps were mixed, while the strongest performances came from Utilities and Healthcare. Materials actually started the week strongly before running into major resistance, while Healthcare gained 3% and Utilities ripped more than 7%.

The Long Pending basket was also telling. Information Technology was the only sector to deliver the confirmation we were waiting for, gaining 3.5% and officially forcing its way into the bullish camp. The others largely remained unresolved. Importantly though, it was still easier to find winners among the areas we were looking to buy or waiting to buy than it was to successfully identify losers.

And I think Oil explains a fair bit of what happened everywhere else. The major threat to the newly emerging risk-on regime was always a resurgence in the oil complex, and that's exactly what we got. Progress in the Middle East stalled, Oil rebounded more than 6%, Energy followed it higher, and by mid-week it was becoming increasingly obvious that the market had developed a new headwind. The aggressive rotation didn't disappear, but it was dampened enough for defensive leaders like Utilities and Healthcare to regain the upper hand.

That's probably the most useful takeaway from the week. The regime didn't completely fail, but it did encounter resistance. Even with conditions changing mid-game, the long and pending baskets still produced more reliable opportunities than trying to pick losers from the avoid basket. That's exactly why the broad-market framework matters: it isn't supposed to predict every sector correctly; it's supposed to tell us which side of the market deserves the benefit of the doubt, and then allow us to adjust as the evidence changes.

The US remains bullish overall, but the first signs of fatigue are appearing beneath the surface. SP500 (SPX) continues to hold its breakout with supportive OBV, while the Russell 2000 (RUT) has now joined the party with a breakout to all-time highs. Dow Jones Transportation (DJT) has also flipped bullish in a minor context, but it is still far from ticking the “indices must confirm” box because it is well below all-time highs. Nasdaq (NDX) also remains non-confirmational as it is trapped in its sideways range, albeit still showing a strong surging impulse off support.

The real caution comes from The SP500 Equal-Weight (RSP) and Dow Jones Industrial (DJI), where bearish divergence is beginning to emerge. Nothing has broken yet, but after the recent surge the evidence increasingly suggests some consolidation or a pullback may be due.

For now, the primary trend remains bullish and US markets continue to support risk-taking. But with considerably less enthusiasm than last week. It will be interesting to see what the liquidity, credit and risk-appetite analysis reveals and whether it too, supports the idea of waning enthusiasm.

Featured Charts

Russell 2000 (RUT)

SP500 Equal-Weight (RSP)

Dow Jones Industrial (DJI)

Australia remains bullish overall, but momentum has stalled. The All Ords (XAO) and ASX200 (XJO) both briefly broke to all-time highs before falling back into their wider ranges, turning last week's breakouts into fake-outs for now. Importantly, neither is showing convincing bearish signals, so consolidation rather than reversal remains the base case.

Breadth is mixed. Equal-Weight (XEW) remains bullish, while XSO continues to struggle at resistance and XEC is improving but still needs a Higher Low to confirm the next step. The broader message: bullish foundations remain intact, but Australia has shifted back into wait-and-see mode for the week ahead.

Featured Charts

ASX 200 (XJO)

ASX200 Equal-Weight (XEW)

Liquidity and credit conditions remain somewhat supportive of risk assets. But that is a fragile conclusion and the data is really more mixed than decisive. The DXY remains bearish but holding key levels, volatility continues falling into the low teens indicating investors are feeling safe, and yields are not rising at the moment despite their broader bullish trend. I think the easing that supported last weeks bullish posturing, that impulse has left the market. Whilst these benchmarks keep drifting sideways I don’t think that provides enough impetus for continued aggression. DXY and yields need to find another impulse lower before I would expect risk and commodities to deliver another leg higher. Simply holding at these pulled back levels won’t be enough.

High Risk Debt is still outperforming Government Bonds (HYG/IEF) i.e. no signs of credit stress. Overall, there is little here currently arguing against risk-taking, but I don’t see nearly enough fuel for markets to achieve escape velocity. Liquidity may hold things up, and healthy credit staves off panic, but that’s about it until further data arrives.

Featured Charts

US Dollar Index (DXY)

Aussie 2-Year Yields (AU02Y)

Last week we correctly anticipated the bounce in risk appetite; this week the question is whether it can survive the inevitable pullback. High Beta vs Low Volatility (SPHB/SPLV) has pushed strongly through its Fibonacci sell zone (investors chasing riskier companies), while NDX/SPX and XSO/XJO have also bounced significantly. None of these ratios have done enough to confirm a new bullish structure and full blown risk-on environment.

That leaves us at an important juncture. Risk appetite has improved, but the ratios now look vulnerable to some cooling off. The bullish scenario is that these pullbacks establish Higher Lows and provide the foundations for confirmed bullish structure. The bearish scenario is that they simply roll over and resume their existing downtrends.

For now, the dashboard remains neutral to bearish and confirmation is still missing. The bounce was step one; what happens on the next pullback should tell us whether risk appetite is genuinely returning or merely enjoyed some temporary relief. Act accordingly.

Featured Charts

Aussie Small Caps vs Top 200

Gold vs Dow Jones Industrial

The sector picture remains somewhat bullish, but a some of last weeks excitement has been sucked out. Healthcare, Information Technology and Utilities are the standouts (one growth sector + two defensives). XHJ continues to follow through after its bullish structure change, XIJ has now joined the bullish camp, and XUJ has powered straight through resistance and its Fibonacci retracement zone. Energy also remains technically bullish despite slowing after its recent advance.

Elsewhere, we are seeing more consolidation than continuation. Materials and Industrials have slipped back into sideways regimes, Staples and Discretionary remain bullish but are showing signs of fatigue, while Financials and Property are still stuck in consolidation. Telcos are the interesting one to watch, with a potential liquidity grab and bullish reversal setup developing that could trigger a move into the long basket this week.

NOTE on Materials and Financials: Both retain bullish short-term structure, but that move has simply carried price from the bottom of a much larger sideways range back to resistance. Now that resistance has rejected price, the wider sideways regime matters more.

Nothing has invalidated the bullish structure yet, but fresh longs are no longer automatically supported. Existing positions can ride the trend; new positions should wait for a confirmed Higher Low and clean breakout. That's why both move from Bullish to Sideways.

Featured Charts

Info Tech (XIJ)

Utilities (XUJ)

Healthcare (XHJ)

Telco (XTJ)

The commodity picture has turned off a bit this week. Gold and Silver have both flipped bearish after rejecting major Fibonacci and resistance zones on bearish divergence. Both could simply be correcting their recent impulses before another leg higher, but for the week ahead the evidence favours further downside or consolidation before buyers get another opportunity.

Copper remains bullish, but its failed hold above all-time highs warrants caution. The bounce from the local 0.618 is supportive, but fresh longs need another clean breakout and hold before the liquidity-grab risk can be dismissed. Uranium remains a developing reversal rather than a confirmed one; the first Higher High is in, but a Higher Low is still required before the bullish thesis becomes actionable.

The major change is Oil. The bearish thesis has been challenged by a strong impulse higher followed by a healthy pullback into the Fibonacci buy zone, with OBV and RSI broadly supportive. The trend has turned bullish, although headline sensitivity and the need for confirmation after the pullback keep it in Long Pending rather than an outright long. Overall, commodities aren’t screaming opportunity like they were recently. For this newsletters short-term oriented audience, the big opportunities have largely unfolded and we need to now wait for the next setup.

Precious metals bearish, copper and uranium awaiting confirmation, while Oil has unexpectedly emerged as the improving chart and once again is threatening to throw it’s weight all over the place.

Featured Charts

Gold

Uranium

The market hasn't turned bearish, but last week could well have been a relief rally moment. What we can say for certain is the level of enthusiasm has cooled.

At the highest level, the foundations remain OK. Both the US and Australia retain bullish primary trends (albeit Australia is threatening to return to it’s frustrating sideways story of 2026), credit remains healthy, volatility continues to fall, and there is still no obvious sign of systemic stress. But once we move further down the decision tree, the evidence becomes considerably less convincing. US indices are still not confirming unanimously with SPX and Russell making new highs whilst NDX and Dow Transportation still lag. Liquidity has stopped improving, and the risk appetite ratios that bounced so strongly over recent weeks are now either approaching resistance, consolidating, or still technically bearish.

We're seeing the same message at sector level. There are still some excellent bullish trends; Healthcare, IT and Utilities; but elsewhere the easy upside has faded. Several sectors have reached major resistance, Materials and Financials have returned to the Long Pending category, and parts of the commodity complex have begun rolling over. This is no longer the environment where I'd be comfortable treating every bullish chart as an invitation to buy.

Importantly, none of this necessarily signals the end of the bullish move. In fact, a pullback here could be exactly what we need. Several markets have already delivered the first impulsive move higher; now we want to see them cool off, establish Higher Lows and prove that buyers remain willing to step in. If that happens, the next round of bullish confirmation could provide substantially better entries than chasing what has already moved.

So after last weeks welcome conclusion that “Longs Are Strongly Supported,” the weight of evidence that has unfolded this week now warrants the taking of one step back.

Longs are TENTATIVELY SUPPORTED at a broad market level. Ball is in the bulls court. But let’s see them prove they can retain possession.

Cheers
Musk

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Disclaimer

This report has been prepared for informational and educational purposes only and does not constitute financial product advice, investment advice, a recommendation, or an offer to buy or sell any financial instrument. The information contained in this report has been compiled from sources believed to be reliable; however, no representation or warranty is made as to its accuracy, completeness or timeliness.

Any opinions, views or forecasts expressed are those of the author as at the date of publication and are subject to change without notice. Financial markets involve risk, and past performance is not indicative of future results. Readers should conduct their own research and, where appropriate, seek independent professional advice before making any investment decisions.

Unless otherwise disclosed, the author may hold positions in securities, commodities or other financial instruments discussed within this report. Any such positions do not alter the independent analysis or opinions expressed.

The Musk Report is an independent publication. The views expressed are solely those of the author and have not been commissioned, reviewed or approved by any company, organisation or issuer discussed within the report. Any company-specific commentary reflects the author's independent analysis and should not be interpreted as an endorsement by, or affiliation with, the entities mentioned.