Looking for clues on market health
The Sandbox Daily (5.21.2025)
Welcome, Sandbox friends.
Today’s Daily discusses:
watching daily signals for clues on market health
Let’s dig in.
Blake
Markets in review
EQUITIES: Nasdaq 100 -1.34% | S&P 500 -1.61% | Dow -1.91% | Russell 2000 -2.80%
FIXED INCOME: Barclays Agg Bond -0.66% | High Yield -0.67% | 2yr UST 4.019% | 10yr UST 4.593%
COMMODITIES: Brent Crude -1.15% to $64.63/barrel. Gold +1.15% to $3,317.6/oz.
BITCOIN: +1.28% to $107,829
US DOLLAR INDEX: -0.51% to 99.608
CBOE TOTAL PUT/CALL RATIO: 0.78
VIX: +15.37% to 20.87
Quote of the day
“When given the choice to be right or kind, choose kind.”
- Dr. Wayne Dyer
Watching daily signals for clues on market health
While market moves on any given day are generally just noise, there are various signs we can use as information to determine if we’re in a healthy market or unhealthy market by looking at different behaviors over daily time frames.
Most of these markers are technical indicators but not all.
Advance-Decline measures, Relative Strength Index (RSI), volume, slopes of 50-DMAs and 200-DMAs, price action around support and resistance levels, sector participation, a stock’s earnings reaction, etc.
Other times, it can be intra-day trading patterns.
For example, when the stock market opens strong but finishes weak, this price action suggests we are in a shaky, perhaps unhealthy market – a bull trap, a countertrend rally, a recession, etc.
The opposite is also true. When the stock market opens weak but finishes strong, this is evidence we’re in a durable, perhaps healthy market.
These micro behaviors can extend to more broader trends called bull markets and bear markets.
Why bull and bear?
As Adam Koos once said: “because bulls attack with their horns from the bottom-up, and bears attack with their claws from the top-down!”
Earlier this week, Monday strongly demonstrated what type of environment the market is currently exhibiting.
Stocks gapped lower on the open by 1% on news that credit rating agency Moody’s had downgraded the United States sovereign credit profile.
While many investors perceived the U.S. downgrade as a destabilization event, retail investors dismissed the headline and bought stocks.
In fact, investors stampeded into the market and bought stocks at the highest rate ever – pushing up prices throughout the day with buyers taking control and willing the market to close green on the day.
Per data from JP Morgan, retail investors purchased a net of $4.1 billion of US stocks in the first three hours of trading. As you can see below, this buying pressure dwarfed any historical measure.
This is just more evidence in an ever-growing list that confirms a healthy market environment for investors.
The rally off the April 21 retest remains impressive from a technical perspective, with breadth thrust indicators continuing to fire alongside improved investor sentiment and multiple instances of buy-the-dip.
Source: JPMorgan
That’s all for today.
Blake
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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